The era of artificial intelligence (AI) dominating US markets may be coming to an end, creating a more balanced environment that allows other growth stories, like India, to take center stage. This shift could be a game-changer for investors looking for new opportunities.
The Current State of AI in US Markets
The AI investment theme has been a primary driver for US markets, with associated capital expenditure being one of the strongest drivers of the US economy. However, the market sentiment has shifted from extreme euphoria to a more nervous stance, as seen in the recent volatility in US tech stocks.
A More Balanced Market Ahead
According to industry experts, the dominance of AI may wane in the coming year, making way for a broader range of market themes. This shift could be a net benefit for India, as it would allow the country's growth story to emerge and stand on its own. India's lack of sizable AI-centric companies compared to the US or China could be mitigated by a more balanced market.
Key Factors to Watch
- Bank of Japan (BOJ) policy decision: A rate hike is largely expected and priced in by the market, and is unlikely to cause a major unwinding of equity positions.
- Earnings acceleration in India: India reported impressive GDP numbers in the last quarter, but this has not yet translated into commensurate earnings growth for Indian companies. Experts remain hopeful that earnings will catch up in 2026.
Outlook for 2026
The upcoming year may mark a period of earnings acceleration in India, making it an attractive destination for investors. With the AI theme potentially losing its dominance, India's growth story could shine, driven by a more balanced market and improving earnings.
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple viewpoints before making any investment decisions.