AI IN FOCUS
Saldanha said continued spending by leading AI companies should support semiconductor manufacturers, component suppliers and broader technology companies. At the same time, he believes India’s banking sector offers value after a period of underperformance, especially if uncertainty around tariffs eases.
“I think the capex runway definitely into 2027 and potentially into 2028 looks pretty good,” Saldanha said. “So, it’s good for the semiconductors, the components, and generally the tech space.”
He said concerns that AI investment could slow because of regulation or internal restrictions have eased, while competition between the US and China continues to drive spending on large language models and AI infrastructure.
On India, Saldanha said companies linked to AI infrastructure could benefit as adoption expands. He identified Netweb as an existing beneficiary and said automation, computing and electronics manufacturing companies, including Dixon Technologies, could gain as AI deployment broadens.
However, he cautioned investors against chasing every AI-related stock, saying valuations can move ahead of fundamentals depending on how much AI contributes to a company’s business.
This is an edited transcript of the interview.
Q: Do you think this is a massive victory for big tech, at least in the near term? Because there is no federal regulation for now that is going to slow down innovation, so they can go full steam ahead. And considering the market has been divided into distinct winners and losers the losers on account of geopolitics, but the winners on account of AI if this is read as a big tech win, what does this mean? Does that mean that the tech rally is very much intact and will go ahead full steam?
A: I think this is a further endorsement. For a few weeks we were getting a little nervous about AI, in a sense, being self-destructive, and maybe limitations being put on it, whether internally or not. People were thinking whether there were perverse viewpoints coming from the three big spenders here. And I think it also shows that, given this AI race, or the superintelligence race, China is not backing down. They’ve shown that on the inference side they’ve managed to sell their tokens significantly cheaper, but the heavy lifting done by the labs, the LLMs, is going to continue.
The capex continues, and for now, it’s good for the capex story because you did see a shift and a bit of a bifurcation, where the hyperscalers that were less exposed versus the labs, or even some of the capex-heavy companies, were starting to benefit versus the big spenders. That shift is probably getting a little more balanced.
The capex runway definitely into 2027 and potentially into 2028 looks pretty good. So, it’s good for the semiconductors, the components, and generally the tech space.
Q: Here in India, the frontline index has been in a downward drift for a while. It’s a bunch of things—oil and the big AI trade globally sucking in all the capital, etc. But, there are names, and people are starting to put together lists of companies, which perhaps feed into AI or are enablers in that sense. Goldman, for example, came out with a report. There are new names. It’s just about putting that theme together because people are looking at it in its entirety, and these stocks have done very well in 2026. Do you own any here in India, the enablers?
A: Out of the enablers, I haven’t gone deep into the Goldman report, but from before, I would say the likes of Netweb continue to be a beneficiary, in my mind. You’re going to get a few more of the automation plays, and some of the capex plays that will benefit from it. But I would caution you: depending on how much of their business is related to AI, you tend to see an overreaction in terms of the share prices.
Otherwise, I would say as it moves to the edge, as it moves into compute, and toward greater CPU adoption, you’re going to see broader beneficiaries, even companies like Dixon on the assembly side. A lot of them will start to benefit as that penetration increases, especially in an Indian context. So, it’s still early days, but I’d say the winners are the ones that continue to execute, have business exposure, and have delivered in the past.
Q: Since you jogged my memory back to Netweb, I recall that you all were one of the few funds that actually got optimistic early, and then it served you well. Have you had a look at any of these other companies that we’ve looked at? ESDS, those kinds of stocks that got listed. There’s plenty of chatter, very extreme, both on the bullish and the bearish side. Your take?
A: To be fair, I haven’t looked at a lot of the smaller, newer companies, partly because the valuations and everything else didn’t make sense for us. To be fair, I’ve been preoccupied with the US leaders, especially those in Taiwan and Korea, including some of the Japanese names on the component side. Those have been phenomenal performers. So, these are good names for now. I cannot give you a qualified opinion on those, unfortunately.
Q: With yields spiking, crude oil prices rising, the macro picture for India itself is not looking very bright. How would you approach the Indian markets now? Is there a fear that we could see a very sharp sell-off, given the cues that we have both on the global and the domestic front? And if you’re looking to buy into the Indian markets, give us a couple of ideas.
A: Globally, that is an issue. It’s a fine balancing act where you’re looking at yields rising faster than EPS, which has been going up, right? Especially with the tech-driven EPS in the US, where you’re looking at the S&P broadly posting high-30% growth numbers, which is absolutely astonishing. But at some point, the rise in yields will matter, and that will affect valuations. So, for now, EPS is overshadowing the rise in yields, especially in the tech space globally, but that is a risk.
I would say for India, the underperformance is pretty stark now. I would put that in context by noting that the Indian real effective exchange rate is very competitive, especially relative to China. So, I do think that manufacturing, and even moving away from tech, has plenty of oomph and firepower for the Indian export sector and engineered goods. So, I would definitely be positive on that.
Barring something I mentioned earlier, if anything comes out of the Lindsey Graham bill that’s gone through the House, and if there are any further tariffs on India, that might mark the low point. To me, that would signal a good time to get bullish on India, especially on financials. When you look at loan growth in the teens, gross domestic product (GDP) growth still being pretty strong, I think the financial sector, especially the private sector banks, has become fairly cheap and very undervalued, frankly.
So, I would say that would be an area that is being ignored. I’m not talking about a week or a month, but if I had to look out over the next six to 12 months, that would be an area where I see opportunity. There is probably despondency; it seems under-owned, and I think that’s where the upside is.
For the full interview, watch the accompanying video
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