Will India's AI multibaggers face a reality check as global bubble fears test valuations?

The robust rally in India's AI-linked stocks is facing its biggest test yet as concerns grow that the global AI trade may be running ahead of fundamentals, raising the risk of sharp corrections in some of the market's biggest multibaggers. Companies linked to data centres, cloud infrastructure, power transmission and high-performance computing have been among the biggest wealth creators of the past two years.

But market experts warn that investors are increasingly scrutinising whether the earnings outlook can justify the rapid expansion in valuations. The caution comes amid turbulence in global technology markets. A sharp selloff in Asian tech stocks recently highlighted the risks of excessive concentration in AI-linked names, particularly in markets such as Taiwan and South Korea where semiconductor companies have come to dominate benchmark indices.

South Korea's Kospi fell more than 8% on Monday, triggering a temporary trading halt before recovering part of the losses.


In India, several stocks have emerged as indirect beneficiaries of the AI infrastructure boom. Netweb Technologies has gained more than 140% over the past year as demand for AI servers and high-performance computing systems accelerated.

Anant Raj has more than doubled over two years on expectations of strong growth in data centre demand.

E2E Networks has nearly tripled during the same period, while HFCL Limited and Sterlite Technologies have emerged among the biggest winners of 2026, with gains of about 120% and 350%, respectively.

The enthusiasm has been fuelled by expectations that India will become a major data centre hub. According to a KPMG report, India's data centre industry could generate nearly $45.7 billion in revenue by 2033 as AI adoption, cloud computing and data localisation requirements drive capacity additions.

Yet analysts increasingly see a gap emerging between the long-term opportunity and near-term valuations.

Vinod Nair, Head of Research at Geojit Investments, said the key concern is no longer whether AI spending will continue, but whether companies investing billions of dollars in AI infrastructure can generate adequate returns on those investments.

"Investors are questioning the lack of measurable return on investment from enterprise AI deployments and the limited impact on broader economic growth thus far, even as AI companies continue to spend aggressively on compute infrastructure," Nair said.

According to him, any recalibration of global AI capital expenditure could trigger corrections across infrastructure beneficiaries, including companies linked to data centres, networking equipment and computing hardware.

The concerns are not limited to India. Global investors are increasingly debating whether AI-related spending is creating another technology bubble similar to previous market cycles.

Gurmeet Singh Chawla, MD of Master Portfolio Services, said many Indian AI-linked stocks have become proxies for global AI sentiment rather than being valued solely on their own earnings potential.

"The real threat is whether the trade has gone far ahead of fundamentals," Chawla said. He noted that many AI supply-chain companies have been re-rated based on multi-year order books and future growth expectations. However, any project delays, earnings disappointments or slowdown in spending by global hyperscalers could lead to disproportionately large corrections.

"What most investors overlook is the second-order risk," he said, adding that high valuations leave little room for execution mistakes.

The concern is particularly relevant at a time when corporate earnings growth globally has slowed, tariffs continue to create uncertainty in international trade and geopolitical tensions in West Asia have pushed up energy prices.

Paresh Bhagat, Chairman of Mangal Keshav Financial Services, believes investors should separate the AI opportunity from AI valuations.

"The AI opportunity remains very real and is likely to play out over several years. However, some stocks linked to AI, data centres and digital infrastructure have seen significant rerating over a short period," he said.

Bhagat prefers companies that are direct beneficiaries of AI-related capital expenditure rather than businesses riding on the broader narrative. He pointed to transmission infrastructure, power equipment, electrical systems and select high-performance computing companies as areas likely to benefit from sustained investment.

Analysts broadly agree that AI remains one of the most important long-term investment themes. The debate is increasingly centred on price rather than potential.

For investors, the structural growth story remains intact, but after a massive rally, stock selection and valuation discipline may matter far more than simply owning anything associated with AI.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)