AI Capex Risks Cloud U.S. Outlook; India Seen as a ‘Safe Harbour’ for 2026: Jefferies
Global markets are navigating a turning point in the race toward artificial intelligence (AI), and leading financier Jefferies suggests that AI-related capital expenditure (capex) risks may weigh down the U.S. economic outlook — while positioning India as a relative “safe harbour” for investors in 2026.
According to Jefferies’ latest global market assessment, 2025 marked India’s weakest relative equity performance in nearly 30 years, with MSCI India substantially lagging other emerging market and Asian indices. Even so, the firm argues that the worst may be behind India’s currency and markets, and that the country’s equity landscape could fare comparatively better if global tech momentum shifts.
AI Capex Concerns in the U.S.
Jefferies highlights that much of the current global market narrative around AI is already priced into valuations, particularly in the United States and other developed markets. The concern now is not whether AI will remain transformative — but whether the heavy capex required to build and scale AI infrastructure will deliver sufficient returns on capital.
In the U.S., hyperscale tech firms are pouring tens of billions of dollars into GPU-heavy data centers and specialized infrastructure. Jefferies warns that this capital-intensive spending — especially as it shifts from cash-funded to more debt-funded — could pose risks to corporate balance sheets, broader markets, and economic growth if returns don’t keep pace.
India: The “Reverse AI Trade”
In contrast, Jefferies describes India’s equity market as a “reverse AI trade”, where the country stands to benefit indirectly from AI adoption without bearing the same level of infrastructure capex risk. India’s market has lower direct exposure to AI-heavy sectors, making it less vulnerable to a capex-driven downturn.
Jefferies expects earnings growth in India to rebound in the next fiscal year, with MSCI India’s earnings per share potentially rising to around 13–14% — up from more modest growth in the current period. This pickup, combined with a stable current-account position and robust foreign exchange reserves, supports the view that India may offer a “relatively safe” market compared with tech-dependent economies.
Balanced Risks and Opportunities
Still, Jefferies’ analysis comes with caveats. India’s weaker relative performance in 2025 reflected slower earnings growth, currency depreciation, and subdued foreign investment inflows. If global liquidity tightens or if there’s a sharp slowdown in India’s domestic economy, risks could resurface.
Nevertheless, the brokerage suggests that if global investors rotate away from heavy AI capex risks, markets like India — with broader participation across sectors and less concentrated tech exposure — could attract renewed interest.
Disclaimer :
This article is intended for informational and educational purposes only and does not constitute investment advice, recommendation, or endorsement. Financial markets carry risks, and individual investment decisions should be based on your own research, risk tolerance, and consultation with a qualified financial advisor. Historical trends and expert views do not guarantee future performance.
