India may gain as global AI investment cycle slows: Report

Concerns over the sustainability of global AI investments could redirect capital towards India, according to an SBI Funds report. It highlighted India's resilient market performance, rising merchandise exports and relatively strong economic indicators despite elevated energy prices.

New Delhi: Concerns over the sustainability of capital expenditure on artificial intelligence are beginning to reshape global capital flows, potentially benefiting India, a report said on Monday.

The report from SBI Funds said artificial intelligence capital expenditure is projected to average around 3.6 per cent of US GDP between 2025 and 2032, significantly exceeding the 1.1 per cent recorded during the dotcom cycle in 2000 and the 2.2 per cent during the 19th-century railroad boom.

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An unprecedented boom in AI capital expenditure has supported strong growth, especially in the US, even as massive borrowings by hyperscalers and technology firms put pressure on long-term bond yields.

“If AI revenues come into doubt, sustaining capex at current financing costs could come under question. The effects would spread to related sectors, US equities, US growth and how money is allocated across asset classes,” the report said.

“The AI trade has sucked in capital from most other assets, and any weakening of that trade should mean capital moving to other areas,” the report noted.

Crude markets have reacted sharply to the mid-term outcome, with Brent crude prices plunging to below $100 per barrel from $115 per barrel in October.

Indian indices ended higher in October amid a sharp sell-off across emerging markets. The Nifty and the Sensex gained about 1.9 per cent and 2.7 per cent, respectively, during the month, making India one of the few major markets to advance.

The MSCI Emerging Markets Index fell 6.6 per cent, while the AI-linked markets of South Korea and Taiwan, which had led gains earlier in the year, declined 16.2 per cent and 5.7 per cent, respectively.

Despite challenges arising from elevated energy prices and their consequent impact on inflation and fiscal conditions, economic indicators in India have held up well, the report noted.

India’s merchandise exports rose about 23 per cent in Q3 2026, supported by the global trade recovery and India’s improved tariff position relative to its peers.