Investors are hedging against the crowded AI trade with 1 market J.P. Morgan calls the ‘default choice’ — and $115B may follow

AI has driven Wall Street’s colossal growth, but fears of financial chaos breaking out have lingered if AI spending slows down or dries up. All told, India is a prime destination to invest in a financial environment that hasn’t been taken over by the AI boom.

“The country’s appeal to global investors, however, is increasingly of a different kind,” J.P. Morgan said in a report. “Rather than competing on AI earnings power, India is emerging as a safe haven for those looking to diversify away from, or trim, crowded AI exposures.”

‘India increasingly becomes the default choice’

It’s getting harder to assemble a portfolio that won’t be affected by the AI boom in some form. The Brookings Institution published an analysis on Sept. 23 estimating that the price tag of the AI buildout in the U.S. over the next seven years will total $10 trillion.

One analyst described India as the top choice for insulating a portfolio against AI’s unpredictable future.

“When investors go looking for non-AI exposure, India increasingly becomes the default choice,” Rajiv Batra, head of Asia and co-head of Global Emerging Markets Equity Strategy at J.P. Morgan, said in the report.

The Indian stock market has proved to be resilient as it overcame a recent chapter of lackluster growth. J.P. Morgan noted that small- and mid-cap companies in India spearheaded that expansion with earnings growth of at least 25% for six to seven consecutive quarters. Once favorable business conditions set in, large-cap companies followed suit and posted double-digit earnings growth over two quarters.

Global investors, though, have been slow to seize on the improved financial environment. J.P. Morgan estimated that $115 billion could begin flowing from investors now that many Indian companies are reporting robust earnings. Foreign investors are starting to snap up shares in e-commerce, hotel, mining and healthcare sectors to list a few.