‘Hottest trend, coldest truth’: CA warns AI mania fuels ETF premium trap for Indian investors

The global AI frenzy has minted trillion-dollar giants and triggered dizzying market swings — from Nvidia’s explosive rally, to Oracle’s whipsaw correction, to OpenAI’s valuation leaps despite governance turmoil. But behind the irresistible hype, a quieter and far more dangerous bubble is forming, says chartered accountant and market commentator CA Nitin Kaushik.

In a detailed post on X, Kaushik warned that the “Global + AI” narrative is pushing Indian investors toward international ETFs at prices that have drifted far away from reality.

“Sometimes the hottest trend hides the coldest truth,” Kaushik wrote, calling it a “big wake-up call” for anyone blindly chasing the AI wave.

Global tech craze meets a supply freeze 

According to Kaushik, the trouble didn’t begin on Wall Street — it began in 2022 in India.

After the RBI capped how much Indian mutual funds could deploy overseas, the supply of global ETF units froze. Yet demand soared as investors rushed to ride the global tech and AI momentum. The result: a classic scarcity premium.

Kaushik likened it to “a movie theatre with 100 seats and 1,000 people wanting to watch the blockbuster.”

The premium trap

With no new units being created, ETF trading prices drifted sharply above their actual underlying value — known as iNAV. Kaushik shared revised figures to avoid reproducing earlier data:

• FANG-theme ETF: 18% premium 
• S&P 500-based ETF: 16% premium 
• NASDAQ-focused ETF: 9-10% premium 
• China/HK market ETF: 15%+ premium 

“Investors aren’t buying value,” he warned. “They’re buying emotionally inflated prices.”

Why this is financially dangerous

Kaushik compared premium-driven buying to booking a flight during surge pricing — the pain only comes later. Even if global tech stocks rise, a shrinking ETF premium can silently wipe out investor gains.

He pointed to past instances where commodity ETF premiums — such as in silver — “evaporated in a week,” leaving investors shocked despite stable underlying prices.

“Premiums don’t collapse slowly,” he cautioned. “They burst.” Kaushik emphasised that booming AI narratives and global market strength are not the problem. Overpaying is.

Before buying any global ETF, he urged investors to ask just one question: “Is it trading close to its iNAV today?”

Smart investing, he said, isn’t about predicting the future — it’s about avoiding predictable mistakes. “As AI themes continue booming, data — not emotion — will protect wealth.”