The global artificial intelligence investment theme is experiencing its first signs of fatigue since the rally began in May 2025, according to Elara Capital's latest Global Liquidity Tracker. Investors are trimming exposure to AI-linked infrastructure and supply-chain plays while maintaining confidence in direct technology beneficiaries. As reported by Elara Capital, diversified global emerging market funds have witnessed six consecutive weeks of redemptions amounting to $10 billion, marking a significant shift in investor sentiment toward the AI ecosystem. The brokerage notes that commodity equity funds and precious metal funds have also recorded sizeable outflows, collectively indicating that broad, top-down allocation into the AI infrastructure and commodity ecosystem is losing momentum for the first time in over a year.
Despite the broader AI theme weakness, investor conviction in core AI beneficiaries remains strong. According to Elara Capital, US technology-focused funds attracted a record $9 billion of inflows during the recent correction, while foreign investments into US equities remained positive for the 11th consecutive week, touching a five-month high of $10 billion. The report notes that commodity equity funds and precious metal funds have also recorded sizeable outflows, collectively indicating that broad, top-down allocation into the AI infrastructure and commodity ecosystem is losing momentum. This selective approach suggests that while investors are reducing exposure to AI infrastructure plays, they continue to back companies directly benefiting from AI technology.
For India, the global AI-driven capital rotation continues to pose significant challenges. As reported by Elara Capital, India-focused funds witnessed outflows of $770 million in the latest week, including $460 million from focused funds. The brokerage notes that India's underperformance relative to GEM funds has fallen to record lows on both one-year and three-year horizons, with much of this trend attributed to the migration of global capital toward AI-linked opportunities since June 2025. According to Elara, India and China have emerged as key sources of funds for investors reallocating capital towards AI-linked opportunities abroad. The report estimates that since June 2025, the widening underperformance has largely reflected the shift of global capital toward AI-linked opportunities, with historical data suggesting such extreme underperformance levels have often coincided with major turning points in relative performance.
Despite the broader AI theme weakness, domestic investors in key markets have increased exposure during the recent correction. According to Elara Capital, domestic investors in Taiwan and South Korea have used the recent correction to increase exposure, with inflows of $5.3 billion and $3.7 billion, respectively. This suggests continued confidence in the long-term AI growth story despite the near-term slowdown in flows, indicating that investors are selectively backing specific AI beneficiaries while reducing exposure to broader infrastructure and supply-chain plays. The report highlights that domestic investors in Taiwan and South Korea have used the recent correction to increase exposure, demonstrating selective investment behavior in the current market environment.
