AI infrastructure supercycle Shariah windfall: Franklin Templeton’s semiconductors focus paying off

Franklin Templeton’s technology play has delivered the strongest returns within its portfolio of nine Islamic funds, IFN Investor data shows; and the trillion-dollar global fund manager intends to capitalize on the AI infrastructure supercycle alongside banking and consumer sectors in search of Shariah compliant alpha.“The themes our teams are most constructive on in emerging markets (EM) are technology and semiconductors in places like Taiwan and Korea, banks across higher quality EM benefiting from domestic credit growth and a favorable policy mix, as well as consumer sectors tied to rising EM incomes,” Mohieddine Kronfol, the chief investment officer (CIO) for global Sukuk and head of Middle East Fixed Income at Franklin Templeton, shared with IFN Investor.

The firm’s positive stance on technology is closely aligned with the ongoing expansion of the global semiconductor cycle, driven by accelerating demand for AI infrastructure. According to the Semiconductor Industry Association, global semiconductor sales reached US$791.7 billion in 2025, marking a 25.6% increase from the previous year, with industry revenues expected to approach US$1 trillion in 2026.

Year to date, the Franklin Shariah Technology Fund clocked a 36.67% return; year-on-year, the fund achieved a 71.81% return.

Chart 1: Franklin Shariah Technology Fund’s cumulative performance

Source: Franklin Templeton

Mohieddine’s focus on banks and consumer sectors reflects the strength of domestic demand drivers across higher-quality EMs, particularly those benefiting from expanding credit channels and improving household income trends.

Beyond equities, the global fixed income markets are also gaining appeal.

“Fixed income markets are arguably the most attractive they have been in decades, particularly if you look at inflation protected bonds,” Mohieddine said, adding:“Sukuk and other high-quality sectors are also benefiting from higher yields, but what sets Sukuk apart are the exceptionally strong credit metrics and financial buffers of GCC issuers,” he explained.

The Sukuk market has continued to expand at record levels. According to S&P Global Ratings, global Sukuk issuance reached US$264.8 billion in 2025, up from US$234.9 billion a year earlier, while total outstanding Sukuk surpassed US$1 trillion for the first time.

Mohieddine attributes much of the asset class’s resilience to the underlying strength of Gulf economies.

“In a world drowning in debt, the GCC is a relative haven of sustainable fiscal and monetary policy with almost 300% of GDP in reserves,” he noted.