AI stock selloff: investors rotate to China, India and Asian value plays

Investors are rotating out of AI-related stocks into Chinese and Indian equities and less tech-dependent Asian sectors, driven by concerns over inflated valuations and doubts about returns on massive AI infrastructure spending. The shift follows a sharp selloff in semiconductor-heavy markets after the US midterm elections. South Korean Samsung Electronics and SK Hynix, along with Taiwan Semiconductor Manufacturing, faced selling pressure. Hong Kong's index tracking mainland Chinese companies rose 5.2% last week, the best since March 2025, while foreign investors bought $1.9 billion of Indian stocks by Wednesday, reversing earlier weakness. Asset managers are favoring domestic-growth plays like Indian financials, drug manufacturers, and consumer firms, with Vietnam also attracting attention. In South Korea, focus is shifting to cosmetics, entertainment, retail, and food companies, while LG Electronics and Japanese and Korean automakers may benefit from reduced US trade barriers. Some investors still see the AI selloff as a buying opportunity, but diversification dominates.