MSCI has released its 2026 Mid-Year Investment Trends report, highlighting that AI developments have driven market performance in the first half of the year. Chief Research Officer Ashley Lester noted that artificial intelligence now dominates nearly all investment themes, but the earnings growth supporting this rally comes primarily from a small group of high-beta semiconductor and AI infrastructure leaders.

For the upward trend to continue into the second half, Lester emphasized that earnings growth must broaden and sustain itself to outperform bond markets, which are still pricing in opposite risk expectations. Geopolitical factors must also remain a secondary concern. As of July 22, the MSCI All Country World Investable Market Index has risen 11% year-to-date, largely driven by earnings and margin expansion, contrasting with 2025 when the ChatGPT frenzy triggered valuation re-rating.

South Korea has led global markets with a 79.6% gain, fueled by AI semiconductor demand. In contrast, the software sector has been the worst performer, with the "SaaS Doomsday" narrative causing a peak-to-trough decline of 27%. High-beta and momentum factors have driven gains in major markets, while factors tied to corporate fundamentals, analyst forecasts, growth, and profitability have remained flat or delivered negative returns in developed markets. This pattern has occurred only a few times in the past 30 years, including just before the peak of the 2000 dot-com bubble.

Oleg Ruban, MSCI's Head of Asia Pacific Research, stated that institutional investors in the region are facing a market environment dominated by AI and high concentration. Allocation strategies among regional investors are diverging: some view AI as a long-term, multi-decade thematic investment, while others adopt defensive approaches to prepare for potential late-cycle adjustments. With AI driving real financing demand, asset selection is becoming increasingly critical.

Regarding AI opportunities in China, Xu Wei, Executive Director of MSCI Asia Pacific Equity Solutions Research, noted that China is the only market in Asia with a complete AI ecosystem, spanning chips, foundational models, and applications. This is supported by a vast domestic user base, allowing local developers to scale at their own pace. Most of the next-generation leaders in this ecosystem remain unlisted. As Chinese AI companies mature and move toward public markets, this pipeline could offer significant investment opportunities for both public and private market investors.