Daijiworld Media Network - Mumbai
Mumbai, Nov 9: The growing uncertainty surrounding the global artificial intelligence (AI) investment boom following the US midterm elections is prompting investors to reassess their investment strategies in Asia, bringing Indian and Chinese stocks back into focus.
Investors are increasingly looking beyond technology companies associated with the global AI boom and turning towards markets with stronger domestic growth prospects, more attractive valuations and the potential to benefit from easing inflation and trade tensions.
Aberdeen Investments has expressed a preference for markets supported by robust domestic economic growth, particularly India and Vietnam, while also identifying potential investment opportunities in Chinese technology companies.
Asian markets have been among the worst affected by the recent global market volatility following the Democrats' sweep of the US Congress in the midterm elections. Several of the region's largest companies are key suppliers to the global AI infrastructure expansion, making their stocks particularly vulnerable as investors reassess the sustainability of AI-related valuations and spending.
The changing investment outlook is encouraging investors to diversify their portfolios and reduce their heavy exposure to AI-linked stocks.
"I expect investors to diversify more broadly and reduce their concentration in the AI trade. This should be supportive of China and other markets where valuations are less demanding," said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA.
India has emerged as one of the potential beneficiaries of this shift, with its relatively limited exposure to the global AI investment cycle increasingly being viewed as an advantage.
The country's appeal has also strengthened following a decline in crude oil prices amid expectations of an earlier end to the Iran war. Lower oil prices could ease inflationary pressures and reduce the country's import expenditure, providing additional support to the Indian economy and financial markets.
The shift in investment sentiment is already reflected in portfolio decisions by some international investors.
Charlie Hong of LOGOS Asset Management said he had sold his holdings in South Korean chipmaker SK Hynix, Samsung Electronics, US semiconductor company Intel and optical technology firm Lumentum Holdings last month. He subsequently increased his investments in Indian equities.
The renewed interest in Indian stocks has coincided with a strong rally in the domestic equity market.
The benchmark Nifty 50 surged 8.6 per cent last week, marking its best weekly performance since 2021. The rally was supported by a strong return of foreign investors, indicating renewed confidence in Indian equities.
The developments suggest a possible shift in global investment preferences, with investors increasingly considering markets offering stronger domestic economic fundamentals and relatively attractive valuations rather than concentrating their investments in the AI-driven technology boom.