Growing concerns about the sustainability of artificial intelligence (AI)-related capital expenditure are beginning to reshape global capital flows, with India emerging as a potential beneficiary, according to a report released on Monday, 9 November 2026 by SBI Funds. The analysis arrives as hyperscalers and technology firms face mounting pressure from elevated financing costs that could force a reassessment of AI investment commitments.

The Scale of the AI Capex Boom

The SBI Funds report projects that AI-related capital expenditure will average around 3.6 per cent of US GDP between 2025 and 2032 — a figure that significantly dwarfs historical technology investment cycles. For context, capital spending during the dotcom boom in 2000 amounted to just 1.1 per cent of US GDP, while the 19th-century railroad expansion peaked at 2.2 per cent. The sheer scale of the current AI investment wave, the report argues, has few historical precedents.

This unprecedented surge has underpinned strong economic growth, particularly in the United States, but it has also contributed to pressure on long-term bond yields as hyperscalers and large technology companies borrow heavily to fund infrastructure buildout.

What Happens if AI Revenue Growth Slows

'If AI revenues come into doubt, sustaining capex at current financing costs could come under question. The effects would spread to related sectors, US equities, US growth and how money is allocated across asset classes,' the report warned.

The report further noted that 'the AI trade has sucked in capital from most other assets, and any weakening of that trade should mean capital moving to other areas.' This capital rotation thesis is central to the argument for India's potential outperformance — as one of the few large economies not deeply tethered to the AI investment cycle, India could attract flows diverted from AI-linked markets.

India's Resilience Amid Emerging Market Sell-off

Indian equity markets demonstrated notable resilience in October 2026, even as a sharp sell-off gripped broader emerging markets. The Nifty50 gained approximately 1.9 per cent for the month, while the BSE Sensex rose around 2.7 per cent, making India one of the few major markets to record gains during the period.

By contrast, the MSCI Emerging Markets index fell 6.6 per cent over the same period. AI-linked markets bore the steepest losses — South Korea declined 16.2 per cent, while Taiwan dropped 5.7 per cent. Meanwhile, crude markets reacted sharply to the mid-term outcome, with Brent crude plunging to sub-$100 per barrel from around $115 per barrel in October.

India's Macroeconomic Indicators Hold Firm

Despite headwinds from elevated energy prices and their knock-on effects on inflation and fiscal balances, India's economic indicators have remained relatively stable, the report noted. India's merchandise exports rose approximately 23 per cent in Q3 2026, supported by a recovery in global trade and India's improved tariff position relative to competing economies.

Notably, this export momentum arrives at a time when several peer emerging markets are struggling with currency pressures and compressed external demand — reinforcing India's relative positioning in the global capital allocation conversation.

What to Watch

The SBI Funds report underscores that the trajectory of AI revenue growth will be the critical variable. Should large technology firms begin reporting revenue shortfalls that cast doubt on AI monetisation timelines, the resulting capital reallocation could accelerate inflows into markets like India. Investors and policymakers alike will be watching whether India's macro stability, export momentum, and relative market performance can be sustained as the global investment cycle continues to evolve.