SynopsisWith AI investments taking center stage, South Korea and Taiwan's stock markets have outpaced India in terms of market capitalisation, largely driven by the booming chip manufacturing sector. Meanwhile, India grapples with foreign investors pulling back and a noticeable absence of a cohesive AI strategy.AI Mania ReordersAsia’s Stock MarketsFrenzied AI investments have caught up with South Korea and Taiwan, pushing their stock markets past India in capitalisation. Makers of memory chips needed in AI infrastructure have surged on both Asian bourses, upsetting the pecking order for overseas investors in emerging markets (EMs).India, which had a market capitalisation multiple times that of South Korean and Taiwanese stock exchanges, is witnessing massive selling by foreign investors after the conflict in West Asia. All three economies are susceptible to energy market disruptions, but India does not yet offer an AI-led investment theme.The narrow bull markets of Taiwan and South Korea, though, present a concentration risk to investors in an environment of hardening bond yields. US stocks declined sharply last week on strong employment data, increasing the chances of a rate hike by the US Federal Reserve later this year.The AI boom on East Asian bourses is also being fed by strong speculative interest, which raises the likelihood of a sharp correction. Indian stocks, in contrast, have already come off high valuations and offer a variety of investment themes that the Taiwanese and South Korean bourses cannot match because of their heavy technology orientation. Once the energy market stabilises, India will shed some of its vulnerability. The advantage of export-oriented Taiwan and South Korea during an energy crisis will also begin to subside. Yet, AI has set off a supercycle in chip demand, and the two countries are very well placed to exploit it.India will at some point enter the AI play in earnest, opening the field for foreign investors. The country is seen as a critical base for accelerating deployment. Fresh capacities by Taiwanese and South Korean chip makers will seek new locations, and India is an obvious choice from the perspective of supply chain resilience. The global market-capitalisation order is unlikely to reverse soon. But India should be able to close the gap. ...moreElevate your knowledge and leadership skills at a cost cheaper than your daily tea.Subscribe Now