India is losing some capital to the massive US AI investment cycle, but investors say demographics, energy demand, geopolitical shifts and Gujarat's GIFT City could underpin long-term flows into the country.
The AI investment boom is diverting capital from India into US technology and infrastructure, besides Taiwan and South Korea, but investors at the Economic Times World Leaders Forum underlined that the country's long-term growth prospects remain intact.
The panel discussion on "The New Geography of Capital: Where Is Smart Money Headed?" was moderated by ET's Arijit Barman.
AI's enormous capital needs have become the biggest force shaping global flows, said Kevin Strain, president and chief executive officer at Sun Life. The ecosystem could require $500 billion to $1 trillion in investment, pulling money into semiconductors, data centres and power generation. That has left India underweight against global benchmarks. Matching its weight in the MSCI index would require about $100 billion of additional capital, according to Strain. Despite the decline, Indian equities are trading at valuations similar to the US at about 20 times earnings, while the country has lower volatility, stable regulation and continued company formation. "AI capital needs continue to be pretty high," Strain said.
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The current diversion shouldn't be mistaken for a structural loss of confidence in India, said Sharon White, senior managing director and head of global affairs at La Caisse, one of the world's largest institutional infrastructure investors. The fund invests over 10, 20, and sometimes 30-year horizons, making demographics, talent and energy infrastructure more important than short-term market cycles. "We need to be very careful that we don't talk India down," she said.
