If you own iShares China Large-Cap ETF (NYSEARCA:FXI) or Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO) as your Asia AI proxy, the last twelve months have been frustrating. FXI is down 6.63% over one year and off 12.01% year to date, while VWO has done well, up 21.63% over one year, but nowhere near what Korean and Taiwanese investors have booked. FXI is dominated by banks and consumer-internet names, and VWO spreads exposure across dozens of countries. For direct exposure to the Asian AI hardware boom that pushed Korea’s ETF up 104.54% over five years, a more targeted vehicle exists.
What FXI and VWO Are Actually Giving You
The China fund is a concentrated bet on the country’s largest firms. Its top holdings are Alibaba (8.66%), China Construction Bank (8.25%), and Tencent (7.72%), with financials the single largest sector. That is a China reopening trade rather than an AI infrastructure trade.
The emerging markets fund owns roughly the same TSMC exposure many investors want, but diluted. Taiwan Semiconductor accounts for roughly 14.68% of the emerging markets fund, alongside India, Brazil, South Africa, Saudi Arabia, and the rest of the emerging world. For the 0.08% expense ratio, broad diversification is the feature. For AI exposure specifically, it is the drag.
The Alternative: iShares MSCI Taiwan ETF
The iShares MSCI Taiwan ETF (NYSEARCA:EWT) allocates 22.3% of the fund to Taiwan Semiconductor Manufacturing, roughly 50% more single-name exposure than VWO provides. Add Hon Hai Precision at 5.7%, MediaTek at 4.6%, and Delta Electronics at 3.6%, and roughly a third of the fund is concentrated in the AI server, chip, and power supply chain that NVIDIA and U.S. hyperscalers depend on.
That concentration has translated into returns. EWT is up 60.37% year-to-date and 82.8% over one year, effectively matching Korea’s move with a different mix of drivers. Over five years, EWT has returned 127.25%, ahead of Korea’s five-year figure and multiples of what FXI (down 15.05%) and VWO (up 28.9%) delivered. The expense ratio is 0.59%, identical to EWY’s 0.59%. JP Morgan’s 2026 outlook flagged Asian emerging markets as an increasing source of international earnings growth tied to AI. EWT is the cleanest single-ticker way to hold that thesis.
A Secondary Option: Thailand
For readers wanting Asia growth exposure without piling further into the semiconductor cycle, the iShares MSCI Thailand ETF (NYSEARCA:THD) is the quieter play. THD has returned 24.05% year to date and 44.59% over one year, with a 3.49% dividend yield and top holdings led by Delta Electronics at 17.98%, the Thai-listed sibling of the same AI power-supply franchise inside EWT. It captures data center power buildout without a 22% single-stock chip weighting. The mechanism differs, but the tailwind is the same.
Tradeoffs Worth Naming
The Taiwan fund is a concentration trade. A TSMC pullback or Taiwan Strait headline moves this fund more than it moves VWO. The 5.02% one-week drop and 14.91% one-month decline in the iShares MSCI South Korea ETF (NYSEARCA:EWY) illustrate the point: focused AI ETFs move faster in both directions. Selling FXI at a loss inside a taxable account may be useful for tax-loss harvesting; selling appreciated VWO is a different calculation. For readers thinking about how sector concentration fits alongside broader tech holdings, 7 Stocks Powering the AI Boom (That Aren’t Chipmakers) covers adjacent power and cooling names that EWT already owns through Delta and Hon Hai.
How to Think About the Swap
Replacing FXI with EWT changes what you own. It exists in Chinese banks and internet platforms and enters Taiwan’s semiconductor and electronics sectors. That is a directional call on AI infrastructure worth making explicitly rather than by accident. Partial swaps, keeping some VWO for breadth while carving out a 5% to 10% EWT sleeve for AI concentration, preserve diversification while adding the exposure that the broad fund dilutes. For anyone already holding EWY at these levels, layering in EWT is closer to doubling down on the same theme than to diversifying.
Where This Leaves the Decision
The China fund remains a bet that has not paid this cycle. VWO is a fine core holding at 0.08%. For the specific job of owning Asia’s AI supply chain, EWT delivers exposure at a fee comparable to peer country funds, with a 10-year track record of 467.25%. Whether that argues for a full swap, a partial reallocation, or staying put depends on how much single-country and single-stock risk the rest of the portfolio can accommodate.
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