The global artificial intelligence (AI) boom is rapidly reshaping financial markets across the world, with Taiwan overtaking India to become the world’s fifth-largest stock market as investors increasingly pour money into semiconductor and AI-linked companies.
According to Bloomberg data, Taiwan’s total market capitalisation has surged nearly 50 per cent this year to touch almost $5 trillion, driven largely by a strong rally in technology and chip manufacturing stocks. India, on the other hand, has slipped to sixth position after its market capitalisation declined around 7 per cent year-to-date to approximately $4.92 trillion amid equity market weakness and pressure on the rupee.
The growing dominance of AI-focused companies has also pushed South Korea closer to India in the global rankings. South Korea’s market capitalisation has jumped nearly 70 per cent this calendar year to around $4.5 trillion, fuelled by massive gains in semiconductor giants Samsung Electronics and SK Hynix.
The AI-driven market frenzy has become so intense that Nvidia Corp, the world’s leading AI chipmaker, is now valued at nearly $5.2 trillion, more than the combined market capitalisation of all listed Indian companies. The remarkable rise highlights the scale of global investor enthusiasm around AI infrastructure, semiconductors, memory chips, and data centre expansion.
Analysts say foreign investors have increasingly shifted their money toward markets directly linked to the AI supply chain, particularly Taiwan and South Korea, while reducing exposure to India. India has reportedly witnessed foreign investor outflows exceeding $20 billion so far this year.
“Since April 2025, foreign flows had rotated toward South Korea and Taiwan to play the AI trade, and Brazil on the back of the commodity rally, largely at the expense of India and partially China,” Elara Capital said in a recent note.
Investor optimism has been supported by expectations that leading AI companies could collectively spend close to $1 trillion over this year and next on capital expenditure related to AI infrastructure. This includes investments in semiconductors, advanced chips, power infrastructure, and data centres required to support AI technologies globally.
Technology stocks in Asia have emerged as major beneficiaries of this trend. Shares of Samsung Electronics have risen around 2.4 times this year, while SK Hynix has tripled in value amid soaring demand for AI memory chips. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has also gained nearly 50 per cent during the same period.
Experts believe India’s relatively weaker position in the AI ecosystem has reduced its attractiveness compared to Taiwan and South Korea. Unlike those markets, India lacks large globally dominant semiconductor manufacturers or AI hardware companies that can directly benefit from the ongoing AI investment cycle.
Pratik Gupta, Chief Executive Officer and Co-Head at Kotak Institutional Equities, said India is currently “neither a pure AI play nor a high-growth outlier,” making it less appealing for foreign investors seeking exposure to the AI rally.
He also pointed out that India remains one of the few major emerging markets imposing capital gains tax on foreign investors, which can further reduce investment returns, especially during periods of currency weakness and a widening current account deficit.
Despite losing ground in the short term, some analysts argue that India’s market remains structurally stronger due to its diversified nature. Unlike South Korea and Taiwan, where a handful of technology companies dominate market valuations, India’s market capitalisation is spread across multiple sectors.
For instance, Reliance Industries, India’s most valuable listed company, contributes only around 4 per cent of the country’s total market value. In contrast, TSMC accounts for nearly 40 per cent of Taiwan’s market capitalisation, while Samsung Electronics and SK Hynix together represent almost half of South Korea’s market value.
However, market experts caution that as long as enthusiasm around AI-linked stocks continues, global investors are likely to keep rotating capital toward Taiwan and South Korea, even while overlooking concerns related to market concentration and valuation risks.
