Christopher Wood warns of AI fatigue. Why Jefferies is turning to India and China

Published 10 July 2026 · tech

Emerging markets bull Christopher Wood says the spectacular AI trade is showing clear signs of “fatigue”, and Jefferies is responding by tilting exposure toward cheaper

Emerging markets bull Christopher Wood says the spectacular AI trade is showing clear signs of “fatigue”, and Jefferies is responding by tilting exposure toward cheaper, under‑owned markets such as India and China that stand to benefit from mean reversion away from crowded AI winners. He believes the “picks and shovels” of the AI capex boom will keep outperforming even as investors rotate out of hyperscalers and into value names across Asia.In his newsletter 'GREED & fear', Wood writes that the new quarter has opened “with much talk of ‘AI fatigue’ as investors look out for a peaking out of momentum and rotation into cheaper ‘value’ names which have not been part of the AI trade,” citing Tencent as one Asian example. He argues that sharp pullbacks in Korea’s AI leaders are “both natural and healthy” after “hyperbolic moves,” with the Kospi now down 22% from its 19 June peak and single‑stock leveraged ETFs on SK Hynix and Samsung Electronics dropping around 30% from asset highs.Wood highlights just how extreme the AI run‑up has been: since the start of 2023, a market‑cap‑weighted basket of Micron, SK Hynix and Samsung Electronics has surged about 760%, versus a 180% gain for a basket of Alphabet, Amazon, Meta and Microsoft. “Long‑term GREED & fear would still rather own the DRAM makers,” he says, adding that “the demand for compute can keep growing even as the cost of tokens collapse,” while he has “no idea which of the hyperscalers, if any, are going to be successfully monetising their AI capex.”Also Read | Korea's pain will be India's gain?

Why Nifty bears betting on Kospi crash may get disappointedTrillion‑Dollar AI Capex, Thin MonetisationJefferies underscores the macro scale of the AI build‑out, estimating that the four major US hyperscalers will spend about US$700bn on capex this year and more than US$800bn next year, rising to over US$1tn in 2027 when Oracle, Anthropic, OpenAI and neo‑cloud players are included. This US$1tn figure equates to roughly 3% of US GDP, around 22% of US non‑residential fixed investment and an estimated 33% of total pre‑tax profits of all US non‑financial companies, underlining Wood’s description of AI as “the mother of all cycles.”Yet, he warns that the financing and accounting of this capex arms race are increasingly stretched. The four hyperscalers have lifted projected capex to a massive 92% of projected operating cash flow, collectively issued US$169bn of bonds so far this year and accumulated US$662bn of future data‑centre lease commitments that remain off balance sheet, with total undiscounted lease obligations nearing US$969bn.Why Jefferies Is Rotating Toward IndiaAgainst that backdrop, Jefferies is deliberately tilting its Asia Pacific ex‑Japan asset‑allocation toward markets less dominated by AI momentum. In its latest GREED & fear note, the firm assigns India a 12% recommended weight versus a 10.9% benchmark weight in the MSCI AC Asia Pacific ex‑Japan index, giving India a positive mismatch of 1.1 percentage points.Despite a correction in memory stocks, GREED & fear remains Underweight Taiwan and only Neutral on Korea, having cut Korea’s neutral weighting from 24.6% to 20.8% since late June, while maintaining exposure to smaller ASEAN markets largely “just to maintain a presence there.” Wood’s message is that markets like India, which host “cheaper ‘value’ names which have not been part of the AI trade,” are well positioned to benefit from any sustained rotation out of momentum AI names.China: Valuation Play in the RotationChina is the other key leg of Jefferies’ rotation.