Suppose you already have substantial exposure to U.S. equities. After another strong year for the American market, you decide to diversify internationally by purchasing an emerging-markets exchange-traded fund. Two obvious choices are the biggest in the category: BlackRock’s iShares Core MSCI Emerging Markets ETF (IEMG), which trades under the ticker symbol “IEMG,” and Vanguard’s FTSE Emerging Markets ETF (VWO), which trades under “VWO.”

At first glance, the funds appear nearly identical. Both hold thousands of companies across emerging markets. Both charge rock-bottom fees. Both manage more than $150 billion. Most investors would expect them to deliver nearly identical long-run returns.

However, the landscape is subtly shifting, particularly due to the burgeoning artificial intelligence sector. Companies that were once minor players in emerging markets are now seeing their valuations soar, fundamentally altering the composition and risk profiles of broad emerging-market ETFs. The phenomenal growth and investment in AI technologies globally have catapulted certain sectors and companies, particularly those in semiconductor manufacturing and related technology industries, to the forefront. South Korea, a global leader in these areas, has consequently seen its stock market gain significant weight within these indices.

This concentration means that investors in IEMG and VWO might be unintentionally taking a much larger position in the AI race than they realize. While diversification is a primary goal of these funds, the disproportionate rise of a few key sectors and countries can lead to an accidental, yet substantial, bet on the future of artificial intelligence. This concentration risk is something investors should be aware of, as it can impact the overall performance and volatility of their emerging-market exposure.