A recent sell-off in AI-linked shares has prompted a rethink on the global chip industry’s prospects, with Indian markets showing signs of renewed interest as investors assess the sustainability of the AI boom and its impact on emerging economies.
A recent sell-off in AI-linked shares has reopened an argument that has hovered over emerging markets for much of the year: whether the boom has merely paused or is beginning to fray. Mark Martyrossian, director at Aubrey Capital Management, said the sharp reversal in memory chip makers and infrastructure suppliers was a reminder that semiconductors remain a cyclical business, even after two years of heavy enthusiasm around artificial intelligence. Market data reported by MoneyWeek and the Financial Times’ sister publication MarketWatch showed that the wider chip complex has weakened even as profits in parts of the sector have remained exceptionally strong.
Martyrossian said the next phase will hinge on two forces: how much more the big technology groups are willing to spend on AI infrastructure and how fast shortages in memory chips and related parts ease. Reuters has reported similar concerns in recent weeks, with investors increasingly focused on whether the spending wave can sustain current valuations. The caution has grown as some analysts question whether the industry is moving from a cash-rich build-out to a more debt-dependent model, which could make the cycle less durable.
That debate has also been sharpened by China’s ambitions in AI and chips. According to the summaries from local and international outlets, new models from Chinese groups and the debut trading of chipmakers such as CXMT and YTMC have fed speculation that premium AI hardware may not remain scarce for long. At the same time, South Korean leaders SK Hynix and Samsung still dominate the most advanced memory segments, and the region’s chipmakers are pressing ahead with huge investment plans to meet demand.
For India, Martyrossian sees the same AI-led rotation from a different angle. Because the market has relatively little direct exposure to the chip trade, it has been hit by foreign outflows, but he pointed to early signs of a return, with net buying picking up in the first two weeks of the month after a long stretch of selling. He said India’s economy remains on firmer ground, with growth above 7% in the past two quarters, while valuations have eased from their September 2024 peak. Aubrey Capital has started to nudge its India position higher from low levels, betting that any further cooling in AI enthusiasm could help redirect money back into the market.
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