Latest earnings season is raising the bar on the AI theme; tactically neutral on India, says BlackRock's Ben Powell

His comments come after the October 30 rout in US technology stocks, when the Nasdaq 100 fell 3.5% and the Nasdaq Composite dropped 2.86%, its worst day since June. The S&P 500 lost 1.82%, while Nvidia fell 4.2% and the Philadelphia Semiconductor Index slid 7.2%. The selloff has revived a familiar debate: are beaten-down Nasdaq names such as Nvidia, Alphabet and Meta now a buy-the-dip opportunity, or simply cheaper on the way to becoming fairly valued?

Powell’s view is that AI remains a structural investment theme, but the latest earnings season has raised the bar. “We remain constructive on AI as a structural investment theme, but the latest earnings season is raising the bar,” he said. India: long-term overweight, tactically neutral Powell also positions India as a counterpoint to the concentrated US AI trade. “India offers an interesting counterpoint.

Its long-term growth story is supported by an expanding workforce, rising productivity and digitalisation, while growing household investment in financial assets should deepen domestic capital markets and help fund future growth,” he says. BlackRock maintains an above-benchmark allocation to Indian equities over a five-year-and-beyond horizon. The firm’s strategic case rests on demographics, productivity gains, digital adoption and the deepening of India’s domestic capital markets.[blackrock]

But Powell draws a clear distinction between the long-term view and the near-term positioning. “These structural trends underpin our above-benchmark allocation to Indian equities over five years and beyond, although we remain more neutral tactically and would like to see stronger earnings,” he says. Powell also points to a longer-term shift in how AI could create value. “Longer term, India could also benefit as AI broadens from its creators to the businesses and economies that successfully adopt the technology,” he says.

The implication is that the next phase of the AI opportunity may not be limited to chipmakers, model developers, cloud providers and hyperscalers. Businesses that use AI to improve productivity, underwriting, logistics, diagnostics or customer service could also benefit. For India, that suggests a potential opportunity beyond replicating the US hyperscaler model: applying AI across a large, digitising economy with a young workforce, expanding formalisation and growing household savings.

Why the AI trade is getting harder The concern in markets is not that demand for AI has disappeared. Rather, investors are increasingly focused on whether the enormous cost of building AI infrastructure (data centres, chips, power and computing capacity) will be recovered through future revenue and profits. Amazon, Alphabet, Microsoft and Meta are together expected to spend as much as $828 billion on capital expenditure this year, much of it on AI-related infrastructure.

Alphabet’s future spending commitments have crossed $1 trillion, while Meta’s have risen to $825 billion. The current market may reward companies that can fund AI investment from their own cash flows, protect margins and show a credible path to monetisation. By contrast, companies dependent on continued external funding, aggressive borrowing or unproven business models may face greater scrutiny. The pressure is already visible in recent results.

Alphabet posted negative free cash flow for a second consecutive quarter, while Amazon’s capital spending came in higher than expected. AI adoption may matter more than AI creation now. And for Indian investors, there may be a parallel question: while the US AI complex reprices, can India benefit not from building AI, but from putting it to work?