By Reshma Kapadia
The U.S. continues to be the investor focus for the artificial intelligence boom. But AI adoption is strong abroad, especially in the Gulf and China, and even some emerging markets.
About a fifth of revenue coming from emerging market companies is linked to AI and 40% of labor costs, or roughly 5% of total operating costs, are exposed to AI automation, according to Alastair Pinder, head of emerging markets and global equity strategists at HSBC. How much AI boosts margins will depend on adoption.
When it comes to regular use of AI and trust in the system, the U.S. ranks No. 10. India is in top place, followed by United Arab of Emirates, China and Saudi Arabia, according to a report by Deutsche Bank highlighting the Gulf's AI involvement. Nearly 65% of the working age population use AI tools in the UAE.
The Gulf is the focus of a separate report from Deutsche Bank thematic strategist Adrian Cox, who sees the region as well positioned for AI given its abundant cheap energy, a population using AI that has trust in the system and the deep pockets of the region's sovereign-wealth funds to bolster investment. After Virginia and Texas, Saudi Arabia and the U.A.E. are next in terms of top locations for data centers.
The war in Iran has created questions about the Gulf's AI development in the near term. Data centers have been attacked in the U.A.E. and Bahrain, and there have been disruptions to a third of global helium supply, which is critical for semiconductor production. Gulf leaders have said their long-term investments won't be affected but strategists are monitoring the conflict to gauge the impact.
"The greater threats over the longer term would come from a prolonged strain on the hydrocarbon revenues that have helped drive the huge AI investments made by the region at home and abroad," Cox said via email.
But the Middle East is among the beneficiaries HSBC sees for the next leg of AI gains. Ranking emerging markets on five fronts -- amount of revenue tied to AI, potential labor cost savings, AI diffusion, AI preparedness, and corporate AI usage based on earnings call transcripts, HSBC sees Taiwan, Korea, and mainland China as the most likely beneficiaries.
The second group of beneficiaries include countries in the Middle East like the U.A.E., Eastern Europe and South Africa as adoption improves. Increasing corporate usage is emerging in these countries, and they have the potential for meaningful cost savings, according to HSBC.
"As AI deployment spreads, a wider set of companies should begin to see meaningful margin upside," Pinder writes. HSBC says a screen of emerging market companies already using AI and that have identified tangible use cases for the technology trades at 13.7 times forward earnings -- 18% undervalued based on its own valuation models.
HSBC identified 72 companies that have offered specific and tangible use cases for AI and quantified some of the benefits. That list includes Saudi Aramco, which HSBC says is using AI and digitization to optimize its operations such as reducing drilling time, and U.A.E. investment holding company Multiply Goods, which is using enterprise AI tools to monitor performance from its subsidiaries and helping cut investment research time and legal hours by 70% to 80%.
In China, HSBC analysts write that Baidu is using generative AI across its portfolio and has embedded OpenClaw, an open-source AI agent framework, into its app while Tencent Holdings is using generative AI to speed up game content creation and improve targeting for its marketing.
Trip.com is using an AI agent to improve travelers' experiences and AI tools for real-time multilingual communication with hotels and to train hoteliers. Yum China Holdings , meanwhile, is using AI to analyze customer feedback for tweaks often within a day or two after product launches and using generative AI to resolve 90% of customer issues before they reach human teams, according to HSBC analysts.
China's biotech sector has gotten more attention as it becomes more competitive. Companies like GenScriptBiotech are using AI to hasten research and development and cut project timelines.
Write to Reshma Kapadia at reshma.kapadia@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 25, 2026 04:00 ET (08:00 GMT)
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