AI Slump Revives Forgotten Asian Stock Bets From China to India

Asia’s Equity Rotation Looks Beyond the AI Supply Chain

As investors reassess crowded AI bets, domestic demand and less-demanding valuations are drawing attention back to China, India and other Asian markets.

Investors are reducing reliance on AI-linked shares

The reassessment is significant for Asia because some of the region’s largest listed companies supply the global build-out of artificial intelligence infrastructure. Samsung Electronics, SK Hynix and Taiwan Semiconductor Manufacturing are among the companies exposed to investor concerns about whether substantial spending on computing infrastructure will deliver adequate returns. When these stocks come under pressure, the effect can extend beyond individual companies to markets with a heavy concentration in technology suppliers.

That concentration has made diversification a more pressing consideration. Investors cited in the source are looking to reduce exposure to the AI trade rather than necessarily abandon it: some still see the sector’s longer-term prospects as intact and may view a selloff as a buying opportunity. For now, however, caution is encouraging a wider search for returns across Asia.

China and India offer different diversification cases

China’s appeal rests partly on valuations and the potential to add exposure beyond AI-heavy portfolios. Investors are also considering mainland-market exposure and Hong Kong-listed shares as portfolio diversifiers. A Hong Kong gauge tracking mainland companies gained 5.2% last week, its strongest performance since March 2025. That move signals renewed interest, but a sharp weekly gain alone does not establish that the change in sentiment will persist.

India’s case is tied to domestic growth and its relatively limited exposure to the AI supply chain. Its vulnerability to imported energy remains a counterweight, although lower oil prices—linked in the source to expectations of an earlier end to the Iran war—have eased pressure on that front. The Nifty 50 rose 8.6% last week, its best week since 2021, while foreign investors bought a net $1.9 billion of local shares through Wednesday. Those flows and gains mark a notable reversal in attention after Indian and Chinese benchmarks had ranked among the weakest globally through October.

Domestic-facing sectors widen the opportunity set

The shift is not confined to China and India. Investors are also examining Asian businesses whose prospects are linked more closely to local consumption than to the AI investment cycle. Healthcare and consumer staples have been highlighted as possible beneficiaries, while Korean investors are looking at wellness, entertainment, beauty, cosmetics, retail and food and beverage companies. The common thread is a perceived lower dependence on the most crowded chip trade.

Trade expectations are another part of the rotation. Some investors see potential support for Korean consumer businesses and for automakers including Toyota and Hyundai if US trade policies become less isolationist and tariff pressure eases. These remain prospective catalysts, not guaranteed earnings gains. The range of views—from healthcare to consumer companies and selected industrial names—also underlines that investors are choosing specific exposures rather than making a uniform call on Asia.

Key Highlights

• Investor interest is broadening as concerns about AI valuations and infrastructure returns challenge concentrated technology positions.
• China is being considered for its less-demanding valuations and potential to diversify AI-heavy portfolios.
• India’s lower AI exposure and domestic-growth profile are attracting flows, while imported energy remains a risk.
• The Nifty 50 gained 8.6% last week; foreign funds recorded net purchases of $1.9 billion through Wednesday.
• Healthcare and consumer-oriented businesses across Asia are emerging as alternative areas of interest.

Investor Note: The renewed interest in Asian equities reflects a portfolio rotation, not proof that the market’s risks have disappeared. Investors should distinguish between a short-term rebound and durable business prospects, and weigh China’s and India’s different exposures alongside sector concentration, energy sensitivity and the possibility that AI-linked shares regain favour.