EM Stocks Under Pressure: Assessing the Impact of AI-Driven Investor Sentiment on Exposure-Heavy Firms Like Smart Share Global

The global AI boom has reshaped investor sentiment in emerging markets (EM), creating both opportunities and risks for exposure-heavy tech firms. While AI-driven growth has fueled outperformance in sectors like hardware and cloud infrastructure, regulatory headwinds and governance challenges are increasingly pressuring companies like Smart Share Global (NYSE: EM). This analysis examines how AI-driven sentiment and compliance risks are colliding in EM tech niches, with implications for investors navigating this volatile landscape.

AI-Driven Sentiment: A Double-Edged Sword for EM Tech Stocks

The AI investment cycle has become a defining force in EM equity markets. According to a Bloomberg report, AI-related capital expenditure and supportive policy initiatives have propelled hardware supply-chain leaders in Taiwan and Korea to outperform the MSCI EM Index by nearly 10 percentage points in the past quarter. The Information Technology sector, in particular, has been a top contributor to EM equity gains, with AI companies accounting for six of the largest contributors to the Bloomberg EM stocks index in 2025.

This surge is driven by the rapid adoption of conversational AI, which is projected to grow from $12.82 billion in 2025 to $136.41 billion by 2035, fueled by demand for chatbots and virtual assistants. However, the same AI tools that are transforming customer engagement are also reshaping investor behavior. AI-driven sentiment analysis tools now parse earnings calls and social media to gauge market mood, enabling faster, data-rich decisions. Yet, as Deloitte warns, these tools risk introducing biases and "hallucinations," complicating compliance and ethical oversight.

Regulatory Risks: A Growing Constraint on AI-Driven Growth

While AI optimism drives valuations, regulatory frameworks are tightening globally. The EU AI Act and NIST's AI Risk Management Framework now require firms to embed ethical and secure AI practices, while China's stringent measures-such as mandatory labeling of AI-generated content and cybersecurity requirements-add operational complexity. For EM firms, these rules create a dual challenge: complying with both domestic and international standards while managing cross-border data flows.

Chinese tech firms, including Smart Share Global, face additional scrutiny under the "America First Investment Policy," which restricts data access and cross-border collaborations in strategic sectors like AI and semiconductors. These measures, coupled with China's own AI governance frameworks, demand robust data governance and proactive compliance strategies. For Smart Share Global, which operates a mobile device charging network across 1.28 million locations in China, ensuring transparency in data collection and AI-driven operations is critical to maintaining investor trust.

Smart Share Global: A Case Study in Governance and Sentiment Volatility

Smart Share Global's recent contested buyout saga highlights the intersection of regulatory risks and investor sentiment. The company is embroiled in a governance battle between Trustar Capital and Hillhouse Capital, with the latter offering a 42% premium over Trustar's bid. This conflict has intensified scrutiny over corporate transparency, with institutional investors like Carlyle Group reducing their stakes while others, such as Palliser Capital, increase holdings.

The stock's volatility-from an $8.50 Nasdaq debut in 2021 to a recent price of $1.33-reflects broader concerns about legacy depreciation and management entrenchment. While the company's asset-light model and EBITDA-positive operations suggest long-term potential, its AI-driven infrastructure relevance remains unclear. This ambiguity, combined with regulatory pressures in China's AI sector, has created a high-conviction, asymmetric investment opportunity for shareholders.

Navigating the AI-Driven EM Tech Landscape

For investors, the key lies in balancing AI-driven optimism with regulatory caution. While AI is undeniably a growth catalyst in EM tech sectors, firms must navigate a complex compliance landscape. Protiviti notes that "compliance-by-design" is now a strategic imperative, requiring AI firms to integrate risk management into product development. Similarly, investment firms using AI tools must adopt Explainable AI (XAI) frameworks to align with regulatory expectations and mitigate overreliance on opaque algorithms. Smart Share Global's case underscores the importance of governance in AI-driven markets. As the company evaluates its acquisition proposals, stakeholders will closely watch how it addresses regulatory compliance and operational transparency. A resolution favoring minority shareholders could stabilize sentiment, but unresolved governance issues risk further eroding confidence.

Conclusion

The AI revolution is reshaping EM tech markets, but its benefits come with heightened regulatory and governance risks. For exposure-heavy firms like Smart Share Global, the path forward requires not only technological innovation but also strategic alignment with evolving compliance frameworks. Investors must remain vigilant, leveraging AI-driven insights while critically assessing the long-term sustainability of AI-driven valuations in a rapidly shifting regulatory environment.