China AI and the China–US AI Race · Kevin Carter, EMX ETF

What we talked about.

Kevin Carter, founder of EMX ETF, joins Sunny Ray to discuss why China's AI sector deserves a place in emerging market portfolios. Carter traces his path from a 1992 Wall Street internship, where he learned indexing from A Random Walk Down Wall Street, through building early fractional share investing at Electronic Investing Corporation, sold to E*Trade in 2000, and later pioneering direct indexing. He explains why traditional emerging market indexes, dominated by government owned banks, oil, and telecom, failed to capture two decades of real economic growth in China. Carter compares India's digital banking boom to China's earlier internet rise, noting India lacks China's infrastructure but has democracy in its favor. The conversation turns to EMX's newest funds, TGRZ, the China AI Tigers LLM ETF tracking China's leading AI model makers, and AIC, a full stack China AI strategy spanning energy, chips, data centers, models, and applications. Carter argues Chinese open weight models are increasingly used by American startups and that the China US AI race deserves investor attention regardless of which side eventually leads.

Kevin Carter of EMX ETF explains why Chinese AI models and full stack China AI investing belong in the China US AI race conversation.

The questions, and the answers.

What are you building at EMX ETF and what's the worldview behind it?

We run emerging market focused ETFs, starting with EMQQ for internet stocks. Now we're building a family of emerging market AI ETFs. We recently launched TGRZ, the China AI Tigers LLM ETF investing in Chinese AI model makers, and AIC, a full stack China AI strategy. I've spent twenty years hunting for the biggest tech story in emerging markets, and AI is now that story.

You started on Wall Street in 1992. What did that first year teach you that you still use today?

I got one interview at a San Francisco tech investment bank, we talked college basketball, and they told me to start Monday. My boss handed me A Random Walk Down Wall Street to read over the weekend. That year I worked across growth, value, and contrarian funds, which taught me multiple angles on investing before I even had a real desk.

You put fractional shares in front of ordinary investors before anyone wanted them. What did people say at the time?

Back then buying stocks required a hundred share lot and thirty dollar commissions, so you needed thousands of dollars just to make one trade. I thought, why can't someone buy five dollars of Coca-Cola? We built a company called Electronic Investing pooling small orders so people could build their own fund with fractional shares. We sold it to E*Trade in 2000.

You built direct indexing in 2002 and coined tax alpha. Why did the industry take 20 years to catch up?

We called it active indexing, basically building your own index using fifty or a hundred stocks so a taxable investor could loss harvest and beat the index after tax. Early adopters, especially quant minded people at Google, got it immediately. But wealth managers didn't have a box for indexing as an active strategy. It took years to catch up, though now it's over a trillion dollars.

The standard emerging markets indexes are banks, energy, and telecom. When did you realize that wasn't the actual economy?

The first day I got into emerging markets, my partner who wrote A Random Walk Down Wall Street asked me to pull the holdings of the first China ETF. It was eighty percent government owned banks, oil companies, and airlines, entities that don't care about growing earnings. China's economy grew five hundred percent over twenty years, but that index fell fifty percent, because it never reflected the real economy until AI arrived.

You call India the next China. Where does that comparison stop being useful?

China's one party system built incredible infrastructure while India was mired in bureaucracy, so China pulled ahead over the last twenty years. But India built a digital ID system that let it open eight hundred million bank accounts with just biometrics, and smartphones are now under twenty dollars there. India is where China was twenty years ago, minus the infrastructure, plus being a democracy.

What are you pushing hardest on over the next 90 days?

We're pushing hardest on AIC, our new full stack China AI strategy. AI is a five layer stack, energy, chips, data centers, models, and applications. We already cover the models layer with TGRZ, the China AI Tigers, which are China's answer to OpenAI and Anthropic. Their open weight models are getting cheaper and more widely used by American startups, and that trend isn't going away.