AI-Driven Economic Growth in Asia: Currency Valuation and Capital Allocation Strategies in Emerging Markets

The rapid integration of artificial intelligence (AI) into Asia's economic fabric is reshaping global capital flows and currency dynamics. As emerging markets in the region leverage AI to boost productivity and innovation, investors are recalibrating strategies to capitalize on these shifts. Point72's Global Economist Team, including Sophia Drossos and Joy Yang, has highlighted how AI-driven growth is not only fueling industrial expansion but also influencing currency valuations and capital allocation priorities in 2025.

AI as a Catalyst for Currency Valuation in Asia

Asia's emerging markets have become a focal point for AI innovation, with countries like China, South Korea, and India leading in sectors such as semiconductors, renewable energy, and fintech. According to a report by Boston Common Asset, the MSCI EM Index surged by +10.6% in USD terms during Q3 2025, driven by AI-linked hardware manufacturing and solar inverter production. This outperformance has been amplified by the weakening U.S. dollar, which has made emerging market currencies more attractive to investors seeking higher returns according to the same report.

Sophia Drossos, an economist at Point72, emphasizes that AI-driven productivity gains are critical to sustaining this momentum. For instance, AI-powered credit assessment tools in Buy Now Pay Later platforms are expanding financial inclusion in markets like Indonesia and the Philippines, fostering consumer spending and economic resilience. Such innovations not only strengthen domestic demand but also enhance the appeal of Asian currencies in a low-interest-rate global environment.

Capital Allocation Strategies in AI-Driven Sectors

Point72's Global Economist Team has identified three key areas where capital is flowing into AI-linked opportunities in Asia:

1. Semiconductors and Advanced Manufacturing: Companies like Taiwan Semiconductor and Delta Electronics have seen significant inflows due to their roles in producing AI chips and energy-efficient systems according to Boston Common Asset. Joy Yang notes that these firms benefit from both domestic policy support and global demand for AI infrastructure according to Point72's team.
2. Defense and National Security: Firms such as BigBear.ai are capitalizing on AI-driven autonomy solutions for defense applications, aligning with U.S. and Asian government investments in critical infrastructure according to a recent analysis. This sector's growth is further supported by geopolitical tensions that prioritize technological self-reliance.
3. Healthcare and Biosimilars: Emerging markets are leveraging AI to accelerate biosimilar drug development, with Asian manufacturers gaining regulatory traction in global markets according to Point72's analysis. This trend underscores the intersection of AI, healthcare innovation, and capital efficiency.

However, challenges persist. The recent strategic review by C3.ai highlights the volatility in AI-focused sectors, where leadership changes and operational hurdles can disrupt capital flows. Investors must balance optimism with caution, particularly in markets where regulatory frameworks for AI are still evolving.

The Road Ahead: Balancing Risk and Opportunity

As AI continues to redefine Asia's economic landscape, currency valuations and capital allocation strategies will remain intertwined. Drossos and Yang advocate for a dual approach and according to Point72's team: overweighting AI beneficiaries in sectors with clear competitive advantages while hedging against currency risks through diversified portfolios. The weakening USD and Asia's AI-driven productivity gains suggest that emerging market currencies will remain resilient, but macroeconomic shocks-such as a U.S. rate hike or trade policy shifts-could test this outlook.

For investors, the key lies in aligning with structural trends. AI is not just a technological disruptor but a macroeconomic multiplier, and its impact on Asia's capital markets will only deepen in 2025.