AI Investment Theme Faces Uncertain Future in Medium Term

Global Investing Landscape: AI Theme Continues to Dominate

The AI-driven investment theme has been dominating the global investing landscape since last year. In fact, one of the major reasons behind the outflow of foreign capital from the Indian market in 2025 was that there were no major AI plays here. Artificial intelligence (AI) not only dominated debates around its impact on human lives but also attracted strong investor interest. There is no doubt that the technology can potentially disrupt almost every sector—from IT and healthcare to education.

While AI remains a compelling long-term investment theme, the sharp rally in AI stocks in 2025 has also raised concerns about a potential bubble. The key question now is whether the theme can continue to dominate the investment landscape in 2026.

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Despite stellar gains and concerns over a bubble, experts believe the sector still offers opportunities as it is rapidly becoming a critical part of the global economic infrastructure. AI is turning into a strategic asset across sectors. Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, believes that it is still not too late to look at the AI theme. He, however, emphasizes that the nature of the opportunity is becoming more nuanced.

The first phase of AI trade was dominated by a narrow group of direct beneficiaries of the technology, such as chipmakers. However, the market will now look for how the technology is aiding productivity and profitability, similar to how large technological shifts evolve. During the early phase of technological advancements, the infrastructure providers are the early winners. However, as adoption improves over time, the benefits of the technology spread more broadly across the economy.

Mandal believes AI may increasingly become less of a standalone trade and more of a horizontal productivity driver across multiple sectors. The companies that adopt it well and use it to improve cost structures, workflows or customer outcomes may eventually matter as much as the companies building the underlying infrastructure. Mandal underscored that AI is still relevant, but the next phase is likely to be broader and more selective than the first.

Harshad Patil, Chief Investment Officer of Tata AIA Life Insurance, highlighted that AI is evolving into a global investment theme. According to Patil, the scale of infrastructure required to support AI makes the next phase of the cycle unique and has created a global value chain. Innovation is taking place across multiple markets, including chip design in the US, semiconductor manufacturing in Asia and technology platforms operating worldwide.

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Patil believes this opens up opportunities to participate in companies across the broader AI ecosystem. A diversified approach that captures both the technology innovators and the infrastructure enablers can help align portfolios with one of the most significant global growth trends shaping the next decade.