Chris Wood urges AI diversification; India gets 12% allocation

Jefferies’ Global Head of Equity Strategy Chris Wood has urged investors to broaden their holdings beyond artificial intelligence stocks, with India receiving a 12% weight in his recommended Asia-Pacific ex-Japan allocation against 10.5% in the benchmark. Economic Times Markets reported on October 18 that his latest GREED & fear note highlights slowing projected AI earnings growth, expensive valuations and mounting financing pressures.

The positioning is not a wholesale exit from the AI investment theme. Wood retains semiconductor holdings that supply the industry, while avoiding companies committing heavily to the AI capital-expenditure race. His regional positioning also favours several Asian markets beyond the major chipmaking centres.

Fast earnings growth, but a much slower pace ahead

The Jefferies projections put global AI-stock earnings growth at roughly 100% in 2026, followed by 30% in 2027 and 22% in 2028. For the global basket excluding AI, the corresponding forecasts are 16%, 9% and 9%. These are estimates rather than realised earnings outcomes.

AI companies therefore remain on a faster projected growth path, but that advantage comes at a substantial price. On an equal-weighted basis, global AI stocks trade at about 23 times forward earnings, compared with 13 times for non-AI stocks.

Wood’s note draws on a diversification warning from Jefferies’ global quantitative strategy team. The concern is that investors are paying elevated multiples just as the exceptional pace of earnings expansion is expected to moderate.

Credit markets signal more expensive funding

Jefferies identifies credit spreads as an important test of whether investors will keep financing the AI infrastructure build-out. Five-year credit default swap spreads for Oracle rose from 186 basis points on September 11 to 288 basis points, while CoreWeave’s increased from 749 to 1,118 basis points.

The note describes both readings as their highest since the AI capital-spending cycle began in early 2023. Credit default swaps provide protection against default; wider spreads generally indicate that protection has become more expensive. They are a measure of credit-market concern, not proof that a company will default.

The yield on CoreWeave’s bond due in 2032 reached 14.8%, adding to the evidence cited by Jefferies of more demanding financing conditions around AI infrastructure.

Chip exposure stays, but below benchmark concentration

TSMC, Samsung Electronics and SK Hynix together represent 32.1% of the MSCI AC Asia ex-Japan Index, according to the report. Their combined weight in Wood’s Asia ex-Japan long-only portfolio is 16%, leaving him exposed to semiconductor demand without matching the benchmark’s concentration in those three businesses.

The note also points to signs that investors are becoming harder to satisfy. Micron shares had fallen 14% since its September 30 results, while Samsung Electronics and SK Hynix were due to report later in October. More broadly, it observes that semiconductor shares have sometimes declined despite results broadly meeting expectations.

AI-related investments in emerging markets returned 81% over the year to June, but their momentum slowed markedly in the second half of 2026, the report says. It also describes stronger performance in several non-AI sectors during that latter period, without identifying specific sector allocations.

Where India fits in the regional allocation

India’s recommended 12% allocation exceeds its benchmark weight by 1.5 percentage points. China receives 22%, against 19.5% in the index, while Hong Kong receives 6%, compared with 3.1%. Vietnam has a recommended 2% allocation despite having no current benchmark weight.

Wood is also described as overweight Indonesia, Malaysia, the Philippines, Singapore and Thailand. The report does not identify particular Indian companies or sectors for investors to buy.

Taiwan receives 25%, below its 28.6% benchmark weight. Korea’s listed allocation is 19%, against 21.1%, although the report separately says its earlier underweight position had been moved to neutral following recent underperformance. It does not reconcile that description with the allocation figures.

The allocations express a brokerage investment view, not assured returns or a personalised investment recommendation.