Rising concentration in AI stocks poses a risk: Kunal Kapoor, Morningstar CEO

A thriving economy can support business growth, but that doesn't automatically translate into attractive investment returns.

"The biggest risk is not that AI fails. It's that investors have become too optimistic about how quickly the benefits translate into company earnings," said Chicago-based Kapoor in an interview during a recent Mumbai visit. "The market is assuming that today's investment spending will eventually translate into stronger revenue, higher margins and better productivity. That may happen, but rarely in a straight line," he said.

The concentration of gains in a relatively small group of AI-linked companies has also made global markets more dependent on a limited set of outcomes, he said.

That caution is also visible in India. According to Kapoor, a thriving economy can support business growth, but that doesn't automatically translate into attractive investment returns.

"India isn't cheap despite the underperformance vs global markets over the past two years. The growth story remains attractive, but investors know that and continue to pay a premium for it," Kapoor said. "What matters is the price you pay. Today there are several emerging markets that screen more attractively than India from a valuation and expected return perspective."

Foreign portfolio investors (FPIs) have remained net sellers since July 2025. In 2026, they have sold Indian equities worth ₹4.55 lakh crore. So far, in October, FPIs have net sold domestic equities worth ₹51,466 crore.

For Indian equities, sustained high oil prices would weigh on earnings and sentiment. But the long-term investment case still rests on productivity, demographics and economic growth and not on any single commodity cycle, he said.

Brent crude prices have risen more than 9% over the past month amid escalating geopolitical tensions and concerns over supply disruptions in the Middle East, with the global benchmark hovering around $115.06 per barrel.

Gold, meanwhile, can serve as a diversifier rather than a growth asset. "Gold has benefited as investors have looked for protection from uncertainty. But its role in a portfolio has not changed: it is a diversifier, not a growth asset."

"For most investors, that argues for a modest allocation rather than a large one," Kapoor said.