India losing global market share as investors chase AI-heavy economies: UBS’ Arend Kapteyn

India is struggling to attract global investment due to its lack of prominence in the AI and semiconductor sectors, according to Arend Kapteyn, Global Head of Economics & Strategy Research at UBS. Investors are instead favoring Taiwan and South Korea, where semiconductor exports and AI-driven demand are fueling economic growth and stock market gains. Taiwan recently overtook India to become the world’s fifth-largest equity market, while companies like TSMC, Samsung Electronics, and SK Hynix benefit from booming AI chip demand. Kapteyn noted that AI-related exports now contribute over 50% of GDP in these economies, offsetting the impact of rising oil prices through strong trade surpluses. In Taiwan, AI-driven exports alone add nearly 10 percentage points to GDP growth, while South Korea is closing the gap with India in market rankings. India faces two key challenges: dependence on imported energy, which weakens its currency amid oil price volatility, and the absence of a globally dominant AI or semiconductor company. These factors make investors prioritize markets with AI momentum, Kapteyn explained. He suggested India could regain investor interest if energy prices stabilize and geopolitical tensions ease, allowing capital to diversify into larger economies with strong demographics. While the AI investment cycle remains strong—supported by heavy spending from tech giants like Meta, Amazon, and Google—Kapteyn warned of risks from overconcentration in a few companies and economies. He also cautioned that rapid technological shifts or competition from China could disrupt the current trend. For now, global markets remain heavily focused on AI-driven growth, leaving India lagging in investor preference.