Is the iShares MSCI Emerging Markets ETF Poised to Outperform the S&P 500 Again?

The U.S.-driven AI surge has delivered substantial gains to firms abroad, with many top semiconductor companies located in Taiwan and South Korea. These nations are frequently classified as emerging markets by global ETF providers.

For investors seeking exposure to leading AI chip producers, the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM) offers a compelling option. The fund holds over 1,100 equities from rapidly expanding economies outside the United States.

While emerging-market equities are frequently viewed as riskier than U.S. stocks, this ETF has consistently outperformed the S&P 500 benchmark. The question remains whether it can maintain that edge.

Let’s examine this international ETF more closely to determine its suitability for a long‑term investment strategy.

iShares MSCI Emerging Markets ETF (EEM): 1,194 stocks, three years of 22.9% annualized returns

The iShares MSCI Emerging Markets ETF holds a portfolio of 1,194 large‑cap and mid‑cap stocks from emerging markets. More than ten countries are represented in the fund, and the top five markets are:

Taiwan and South Korea are home to some of the most in‑demand tech stocks of companies that make semiconductors and AI memory chips. The fund’s five largest stock holdings are household names to investors who follow the Asian AI trade: Taiwan Semiconductor ManufacturingSamsung Electronics, SK Hynix, Tencentand Alibaba Group. These five tech stocks make up about 33.4% of the fund.

During the past three years, this fund has delivered average annual returns of 22.9%, and an impressive 45.06% return in the past year, strongly outperforming the S&P 500.

Should long-term investors buy the iShares MSCI Emerging Markets ETF?

Investing in emerging markets stocks is not for the faint of heart. Countries with developing economies are sometimes viewed as riskier places for investors compared to the U.S., because they can be more vulnerable to global crises. For example, in the month following the outbreak of the Iran war in late February, the iShares MSCI Emerging Markets ETF lost about 13.5% of its value.

Emerging markets are also vulnerable to currency risk. If the U.S. dollar gets stronger compared to the currencies of countries like China, Taiwan and South Korea, this international ETF could lose value in dollar terms.

However, this ETF has previously outperformed the S&P 500 for an extended stretch. Starting with the fund’s inception in April 2003, it outperformed the U.S. benchmark for the next 16 years, with a total return of 428% compared to 356.2% for the S&P 500.

This fund is not on the list of best emerging markets ETFs. It’s somewhat heavily concentrated in a few major tech names from a short list of countries, and it charges a rather high expense ratio (0.72%). But if you believe that the future of the AI boom will deliver big returns to companies in Taiwan, South Korea, and China, this fund might be a better long‑term bet than the S&P 500 — and could be worth including in your portfolio.

Should you buy stock in iShares – iShares Msci Emerging Markets ETF right now?

Before you buy stock in iShares – iShares Msci Emerging Markets ETF, consider this:

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