Since the AI trade peaked around 22 June 2026, the performance divergence across global markets has been striking. In the US stock market, the tech-heavy Nasdaq index slipped from 26,518 to 24,443, logging around 8% dip due to the burst in the AI trade bubble. However, the tech index saw some value buying in recent sessions and turned green, paring all its losses from the counter-AI trade.
The Asian markets witnessed a meaningful correction. Markets at the epicentre of the AI boom have seen meaningful corrections. Korea’s Kospi declined by nearly 38%+, Japan’s Nikkei by 14%+, Taiwan by around 16%+, while China’s Shanghai Composite has suffered a slump of around 8%+. The Hang Seng has been the lone exception, managing gains of around 8%+.
Among AI majors in global markets, South Korea’s SK Hynix share price crashed by around 35% in one month, and Chinese Baidu stock is still down 3% in a month despite value buying in recent sessions.
On Wall Street, major AI companies such as Alphabet, Meta Platforms, and Advanced Micro Devices (AMD) have delivered zero returns over the past month.
What does this mean for the Indian stock market?
On how this contra AI trade would impact the Indian stock market, N. Aruna Giri, Founder & CEO at TrustLine Holdings, said, “The Indian stock market stands to benefit as the contra-AI trade once the crowded AI positioning across global markets begins to take a pause. While it is still early days, the data is increasingly pointing in that direction.”
Aruna Giri said that the key benchmark indices of the Indian stock market have remained broadly flat, comfortably outperforming most of their Asian peers during the same period (Data as on 29th July’26). Although there has been a technical bounce in these markets from the lows, a broader cool-off in the AI trade is not ruled out, though it may not happen in a hurry.
FII data focus
On how such a contra AI trade would benefit the Indian stock market, Anuj Gupta, a SEBI-registered market expert, said, “FIIs have been following sell India buy China and Korea for the last few months due to the AI boom, but after the burst of the AI bubble, they are expected to come back to the Indian equities.”
The SEBI-registered expert said the Indian stock market is oversold and under-owned by foreign investors, who have been continuously selling Indian equities.
Echoing with Anuj Gupta’s views, Aruna Giri said, “Since 22 June, FIIs have turned net buyers in India with inflows of over US$2 billion. At the same time, markets that were major beneficiaries of the AI trade have witnessed sizeable outflows around US$25 billion from Korea, US$30 billion from Taiwan, and over US$7 billion from Japan.”
Aruna Giri of TrustLine Holdings said the market performance and flow data provide early evidence that global investors may already be rotating capital away from crowded AI trades towards relatively under-owned markets such as India. In many ways, India is increasingly emerging as a natural diversification play in a post-AI-trade environment.
Has the AI trade topped out?
On whether AI trade has peaked out, both experts said in unison, “The AI trade may not be over, but the capital rotation away from the most crowded AI beneficiaries and towards markets like India seems to have begun. If this trend sustains, it could become one of the defining tailwinds for Indian equities over the coming quarters.”
US-Iran agreement holds key
Whether the FII inflow would continue towards the Indian stock market, Anuj Gupta said, “Much depends upon how the most-awaited US-Iran agreement for the reopening of the Strait of Hormuz pans out. A delay in this agreement would mean a bounce back in the cooling crude oil prices, which would be detrimental for the inflation-hit global economies, including the US.”
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
