Jefferies raises India allocation to 14% on AI capex peak concerns
Synopsis
Jefferies has flipped its Asia-Pacific script — raising India to 14% overweight while cutting Korea and Taiwan as AI hardware stocks crater. With memory stocks down 40% from their June peak and hyperscaler credit spreads widening, the firm is backing India's lower AI-capex exposure as a hedge. The Nifty 50 is separately projected to hit 28,000 by end-2027.
Key Takeaways
Jefferies raised India's recommended portfolio weighting by 2 percentage points to 14 per cent , extending its overweight vs the MSCI benchmark's 12 per cent .
South Korea cut to 18 per cent (1pp underweight); Taiwan cut to 24 per cent (2.8pp underweight).
Trigger: concerns that the global AI capital expenditure cycle is approaching a peak, hitting chip-heavy markets harder.
Memory stocks have fallen 40 per cent from their late-June high; the China AI Semiconductor Top 10 Index has halved from its mid-year peak.
Consensus forecasts project $1.04 trillion in capex by Microsoft, Amazon, Alphabet and Meta in 2027 , but credit spreads for these firms have widened.
A separate report targets Nifty 50 at 28,000 by end- 2027 , citing earnings strength and lower oil prices.
Jefferies has raised its recommended allocation to India in its Asia-Pacific ex-Japan relative-return portfolio by 2 percentage points to 14 per cent, while simultaneously cutting exposure to South Korea and Taiwan by 1 percentage point each, amid concerns that the global artificial intelligence capital expenditure cycle may be nearing its peak. The move reinforces India's overweight position relative to its 12 per cent weighting in the MSCI benchmark.
Key Portfolio Shifts
Christopher Wood, Global Head of Equity Strategy at Jefferies, authored the report outlining the revised allocations. South Korea's weighting has been trimmed to 18 per cent, leaving it 1 percentage point underweight, while Taiwan has been cut to 24 per cent, placing it 2.8 percentage points underweight relative to the benchmark.
Both markets are closely tied to memory chips, semiconductor foundries, and semiconductor equipment — sectors now under pressure from a potential deceleration in AI-driven hardware spending. India's overweight, by contrast, has widened to 2 percentage points above benchmark.
A Reversal from Earlier 2026 Positioning
The move marks a notable reversal. Earlier in 2026, when AI hardware stocks rallied sharply, Jefferies had raised the index weights of Korea and Taiwan. That positioning is now being unwound as market caution around funding the next phase of AI investment grows, even as capital-spending plans from major hyperscalers remain elevated.
Consensus estimates cited in the report project nearly $1.04 trillion of capital expenditure by Microsoft, Amazon, Alphabet, and Meta in 2027. Despite this, credit spreads and credit default swap spreads for many of these companies have widened, pointing to what the report describes as signs of stress. Memory stocks have already seen a 40 per cent decline from their late-June peak, and the China AI Semiconductor Top 10 Index has halved from its mid-year high.
Why India is Attractive to Jefferies
India is being repositioned not primarily as a domestic-growth story but as a market with relatively lower direct exposure to a potential slowdown in AI-related capital spending. Wood noted that India is not insulated from a broad emerging-market selloff, but its limited involvement in hyperscaler spending and semiconductor hardware made it comparatively appealing at this stage of the cycle.
This comes amid a broader recalibration in global equity portfolios as institutional investors reassess the durability of the AI capex supercycle that dominated emerging-market positioning through much of 2025 and early 2026.
Nifty 50 Outlook
Separately, another report projects India's benchmark Nifty 50 index to reach 28,000 points by the end of 2027, supported by a strong corporate earnings outlook, lower global oil prices, and the prospect of a slower pace of AI-related capital expenditure globally. If realised, that target would represent a meaningful re-rating of Indian equities from current levels.
With global capital now reassessing AI hardware concentration risk, India's positioning as a relative beneficiary in the emerging-market basket could attract further institutional interest in the months ahead.
Point of View
But because global capital is running out of conviction on the AI hardware trade. When a firm of Jefferies' standing repositions India as a 'less exposed' play rather than a growth story, it reflects how fragile the chip-cycle thesis has become. The 40% drop in memory stocks and the halving of China's AI semiconductor index are not footnotes — they are the story. India benefits here as much from what it lacks (deep AI hardware exposure) as from what it has. The Nifty 28,000 target by 2027 is bullish but hinges on oil staying benign and global risk appetite holding — two variables entirely outside India's control.
NationPress
9 Nov 2026
Frequently Asked Questions
Why has Jefferies raised its India allocation?
Jefferies raised India's weighting by 2 percentage points to 14 per cent because India has comparatively lower direct exposure to AI-related capital spending and semiconductor hardware, making it relatively attractive as global concerns grow about a peak in the AI capex cycle. The firm's Global Head of Equity Strategy, Christopher Wood, authored the revised positioning.
Which markets did Jefferies cut and why?
Jefferies cut South Korea to 18 per cent and Taiwan to 24 per cent, reducing each by 1 percentage point and leaving both markets underweight. Both are heavily tied to memory chips, semiconductor foundries, and equipment — sectors facing pressure as AI hardware demand shows signs of plateauing.
What is the Nifty 50 target mentioned in the report?
A separate report projects the Nifty 50 to reach 28,000 points by the end of 2027, supported by strong corporate earnings, lower global oil prices, and slower AI-related capital expenditure globally.
What evidence does Jefferies cite for an AI capex peak?
Jefferies points to memory stocks falling 40 per cent from their late-June peak, the China AI Semiconductor Top 10 Index halving from its mid-year high, and widening credit spreads for major hyperscalers. Consensus estimates still project nearly $1.04 trillion in combined capex by Microsoft, Amazon, Alphabet, and Meta in 2027, but financial markets are reportedly more cautious about funding the next investment phase.
How does this compare to Jefferies' earlier 2026 positioning?
Earlier in 2026, when AI hardware stocks rallied, Jefferies had increased the index weights of South Korea and Taiwan. The latest report reverses that stance, reflecting a shift in sentiment as the AI hardware cycle shows signs of maturing and chip-linked markets face corrections.
