Why is India falling behind Korea and Taiwan in AI race? Jefferies has answers

India’s equity market has remained among Asia’s strongest long-term performers, supported by domestic consumption, financials and structural growth themes. But when it comes to the current artificial intelligence (AI) investment cycle reshaping global markets, Jefferies believes India is not among the biggest beneficiaries. Instead, the brokerage says AI-led momentum is heavily concentrated in Korea and Taiwan, whose technology ecosystems are increasingly driving earnings growth across Asia.

In its latest GREED & Fear report, Jefferies highlighted that the global AI boom is creating clear winners and laggards. And for now, India appears to be trailing the region’s semiconductor powerhouses.

Korea and Taiwan

According to Jefferies’ analysis of MSCI Asia Pacific ex-Japan 2026 forecast earnings growth, Korea and Taiwan together are expected to contribute 44 percentage points, or nearly 83%, of total projected regional earnings growth.

The reason is straightforward: both markets are deeply integrated into the semiconductor and memory-chip supply chain powering AI expansion. Companies across these ecosystems are benefiting from rising demand for AI servers, data centres and advanced computing infrastructure.

India, meanwhile, contributes only around 0.1 percentage points to regional earnings growth, a small share compared with North Asia’s technology-heavy markets.

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Where is India

Jefferies suggests the difference lies largely in market structure.

Korea and Taiwan house major technology hardware and memory-chip companies that sit at the centre of AI spending. Firms such as Samsung Electronics and SK Hynix are seeing strong investor interest as memory increasingly becomes a strategic component of AI development.

India’s listed market, by contrast, has stronger exposure to sectors such as banking, financial services, consumption, industrials and services. These sectors continue to support domestic growth but are not directly linked to the semiconductor-led AI infrastructure cycle.

As a result, India may benefit indirectly from AI adoption over time but is not yet capturing the earnings surge being experienced by hardware-focused markets.

Here's the gap

The difference is also visible in earnings expectations.

Jefferies’ three-month earnings revision analysis across Asia-Pacific markets showed India recording a negative 1.1% earnings revision, indicating softer analyst upgrades.

Korea, meanwhile, saw earnings revisions surge by 95%, reflecting optimism around memory demand and AI infrastructure spending.

The report suggests investors are increasingly rewarding markets with direct exposure to AI hardware and semiconductor supply chains.

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AI is ruling

The trend extends beyond Asia.

Jefferies estimates AI-related stocks account for nearly 80% of S&P 500 returns in 2026, while its AI basket has risen 30% this year. Despite the rally, the brokerage argues AI remains attractively valued and calls it the market’s cheapest sector on a price-to-earnings-to-growth basis at 0.6 times.

Bigger risks are emerging

Jefferies also warned that investors should not focus only on AI.

US inflation rose to 3.8% year-on-year in April, its highest level since May 2023, raising concerns around higher bond yields and broader market pressure.

The brokerage identified 4.5% on the US 10-year Treasury yield as a key stress point for equities, while geopolitical risks around Iran and the Strait of Hormuz, along with developments in Trump–China negotiations, remain major variables.

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For now, Jefferies’ conclusion is clear: the AI race is rewarding semiconductor-heavy markets, and India is still watching much of that rally unfold from the sidelines.