In the latest “GREED & fear” note, Wood says the continuing surge in semiconductor stocks has sharply lifted Taiwan and Korea’s weightings in the MSCI Emerging Markets index, pushing India’s weight down to 13.1%, its lowest level since March 2023.
“Taiwan and Korea’s weighting have risen by a further 0.7 and 2.1 percentage points respectively so far this month to 21.3% and 15.4% while India, the reverse AI trade, has fallen to 13.1%,” he writes, calling India “the chief driver of outperformance” for his portfolio since inception but also the main source of current pain as AI mania dominates flows.
Reflecting those benchmark shifts, Wood has cut India’s recommended weight in his Asia Pacific ex-Japan relative-return portfolio by two percentage points and China’s by one percentage point, while raising Korea by two points and Taiwan by one.
In his updated asset-allocation, India now carries a 15% recommended weight versus an MSCI AC Asia ex-Japan weight of 13.2%, leaving it still overweight but less so than before; Taiwan, by contrast, is at 16% versus a 21.4% benchmark, and Korea at 15% versus 15.4%. “As for GREED & fear’s Asia Pacific ex-Japan relative-return portfolio, GREED & fear will adjust the weightings according to the recent change in benchmark weightings,” he says, adding that India and China will each be trimmed while North Asia tech markets gain room.
Despite the cut, India remains the single largest country exposure in Wood’s long-only Asia ex-Japan portfolio at 32%, a position he concedes has started to drag performance after years of being the star contributor.
“The portfolio continues to suffer from the exposure in India which still accounts for 32% of the portfolio. Whereas India has been the chief driver of outperformance since the portfolio’s inception at the end of 3Q02,” he notes. Wood says the “key point” now for emerging-market investors with index-linked mandates is timing the “switch from North Asia tech to India”, a rotation he believes almost no one is positioned for yet. For now, Wood argues, the market narrative is firmly anchored around the AI “picks and shovels” trade, centred on hyperscaler capex and memory-chip makers in Korea and Taiwan.
He points to the Philadelphia Semiconductor Index’s relentless rally alongside gold and silver miners, and highlights consensus forecasts that Samsung, SK Hynix, and Micron will see a combined US$164 billion jump in revenues this year, with around half of demand coming from hyperscalers. “GREED & fear’s instincts are that the AI picks and shovels trade is going to peak sooner rather later, or at least encounter a temporary hiccup,” he writes, flagging the risk of investors beginning to ask tougher questions about returns on a three-year-old capex ramp-up.
Wood also underlines mounting signs of strain beneath the AI boom, citing sharp drawdowns in Microsoft and Meta last year and their contrasting share-price reactions to another surge in capex spending. At the same time, he argues that OpenAI is losing corporate ground to Anthropic’s Claude while facing massive projected cash burn through 2029, even as Google’s Gemini grabs traffic share in consumer generative AI. This, he suggests, could eventually cool the exuberance around the AI infrastructure trade that has powered North Asia equities and weighed on India’s relative standing in global portfolios.
On the ground in India, however, Wood finds macro indicators turning more supportive. The latest Jefferies Economic Indicator for India, built on 35 monthly datapoints, shows activity sustaining above 7% growth for a second straight month in December, with the composite running at a two-year high of 7.7% year-on-year. Electricity demand, he notes, was up 7% year-on-year in both December and early January after an unusually long and intense monsoon hurt energy metrics last year, raising hopes “that nominal GDP growth could re-accelerate to the 10% level this year.”
Even so, Wood is clear that stronger domestic data may not be enough on its own to drive India’s next stretch of outperformance in a relative sense. “What is really required for India to perform again in a relative sense is an unwind of the AI picks and shovels trade,” he writes, arguing that a pause or reversal in North Asia’s AI-driven rally would likely be the catalyst that pushes global investors back toward India. Until then, Jefferies’ star strategist is trimming his India sails—not abandoning the structural story, but acknowledging that in a market gripped by AI fever, even his favourite long-term bet has to give up some weight.
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