AI stock selloff drives investors to China, India, and overlooked Asian sectors

Investing.com -- Investors are shifting toward Chinese and Indian equities and less technology-dependent Asian sectors as a selloff in artificial intelligence stocks raises concerns about valuations and returns on massive infrastructure spending.

The rotation follows a sharp decline in semiconductor-heavy markets after the U.S. midterm elections, with investors reassessing their exposure to companies supplying the global AI expansion.

South Korea’s Samsung Electronics and SK Hynix, alongside Taiwan Semiconductor Manufacturing, have faced selling pressure as doubts grow over whether AI investment will deliver sufficient profits.

China has emerged as a potential alternative. A Hong Kong index tracking mainland Chinese companies gained 5.2% last week, its strongest performance since March 2025, as investors sought cheaper valuations and less concentrated technology exposure.

India attracted even stronger buying. The Nifty 50 surged 8.6%, its biggest weekly advance since 2021, supported by renewed foreign interest and expectations that easing oil prices could benefit the energy-importing economy.

Overseas investors purchased a net $1.9 billion of Indian equities through Wednesday, reversing earlier weakness in a market that had lagged global peers for much of the year.

Investment managers are increasingly favoring domestic growth opportunities, including Indian financial companies, contract drug manufacturers and consumer-focused businesses. Vietnam is also attracting attention for its domestic growth prospects.

In South Korea, investors are looking beyond major chipmakers toward cosmetics, entertainment, retail and food companies, whose revenues are less directly tied to AI infrastructure spending.

Elsewhere, healthcare and consumer staples are gaining attention, alongside manufacturers that could benefit from reduced U.S. trade barriers.

LG Electronics has emerged as one potential beneficiary of easing tariff pressures, given its exposure to American household appliance and television markets. Japanese and Korean automakers are also drawing renewed interest.

Some investors still view the AI downturn as a buying opportunity, but the immediate shift favors diversification into businesses with different earnings drivers.