“The bigger question with AI is how much that $1 trillion of spending can scale from here… Clearly, the year-on-year growth numbers will slow down, and once they do, the market will price that in and start looking at other opportunities. That’s when India will come into the picture,” he said.
Paroda said Allspring has selectively added infrastructure stocks in India while maintaining its exposure to financials. The fund is staying away from IT services for now, preferring to wait for better earnings visibility and management commentary before deploying fresh capital.
This is an edited transcript of the interview.Q: Let’s begin with artificial intelligence (AI), because when AI does well globally, India suffers. So, where are we in the AI cycle, and what’s the call now on India?
A: The key to AI depends on two companies right now – OpenAI and Anthropic. We believe that as and when OpenAI and Anthropic release their annual recurring revenue (ARR) numbers, that will dictate how the AI cycle behaves. Clearly, there has been some concern that Meta or other players might bow out of this race, which could create excess supply, but so far it looks like Meta is continuing with its plans.
One thing to understand is that Anthropic has kept the HDFC Bank because its ARR was around $9 billion at the end of the year, and now people are talking about almost four to five times that amount in just six months.
So, the AI trade is clearly dependent on these two leaders and how they continue to scale their revenue. If the industry is spending about $1 trillion to generate a little over $100 billion in revenue, then that revenue has to become much bigger than $100 billion. That’s the key question.
Q: What have you been doing in India? Have you been a net buyer, net seller, or have you done nothing?
A: We have actually bought a few infrastructure names recently. In financial services, we have maintained our weight and haven’t added much. HDFC Bank reported decent deposit numbers, but we will wait for the earnings before taking any further call.
We’re selectively adding names in India. The bigger question with AI is how much that $1 trillion of spending can scale from here. A lot will depend on the commentary that the hyperscalers give towards the end of the year.
Clearly, the year-on-year growth numbers will slow down, and once they do, the market will price that in and start looking at other opportunities. That’s when India will come into the picture.
Q: What about sectors beyond financials and infrastructure? It’s an anti-AI trade right now, but valuations are compelling and there isn’t much negative news. Would IT be on your buying list at any point?
A: For now, we are avoiding the sector. There could be a bounce because IT stocks have fallen significantly since the beginning of the year, but we want to wait for more clarity.
Watch the full conversation here
With some of the smaller IT services companies, managements have very little visibility at quarter-end. Sometimes clients pull back at the last minute.
We will wait for the numbers to come out and watch the management commentary. At this point, we’re avoiding putting fresh capital into the sector.
Catch all the latest updates from the stock market here
