By Samie Modak and Winnie Hsu
China, India, and Hong Kong have emerged as the only major stock markets worldwide where top companies account for a smaller share of market capitalisation than a year ago, underscoring their lag in the global AI race.
In both China and India, the ten largest companies in each nation now account for about 19 per cent of total market capitalisation, down respectively from 26 per cent and 22 per cent a year ago, according to Bloomberg-compiled data. Hong Kong remains the least top-heavy market, with big-company concentration slipping to 9.8 per cent from 10 per cent, though the city is largely shaped by financials and mainland-firm listings.
Not coincidentally, these markets’ benchmarks have largely underperformed, especially compared to Taiwan and South Korea, where a few AI stars have lifted entire benchmarks. The data show while diversity can be a strength, it can also leave markets behind when fast-emerging sectors like AI are underrepresented.
The markets dominated by a handful of players tied closely to the AI supply chain have surged. Taiwan’s benchmark, riding chiefly on chipmaker giant Taiwan Semiconductor Manufacturing Co.’s gains, has risen 54 per cent this year, while Korea’s Kospi index, powered by high-bandwidth memory leaders SK Hynix Inc. and Samsung Electronics Co., has roughly doubled.
These firms’ influence on their markets — extensive even before they emerged as key AI suppliers — is expanding. In South Korea, the top 10 companies now account for about 65 per cent of the market, about twice their share a year ago. Taiwan, which was already the most top-heavy market in Asia, also saw its top-10 companies’ concentration grow to 56 per cent from 49 per cent a year ago.
Diversified Setup
Few markets in Asia illustrate the lag in the AI race as clearly as India. The Nifty 50 benchmark, down about 8 per cent this year, is dominated by legacy giants such as Reliance Industries and HDFC Bank. Even its leading tech firms, such as Tata Consultancy Services and Infosys Ltd., are rooted in traditional software services now seen as vulnerable to disruption from AI.
The top-weighted names are no longer pulling the index as strongly, while the next tier has yet to generate a replacement engine, Chanana said.
On the flip side, that same diversity could provide stability if investors judge the AI spending cycle overheated and global investors turn to markets with robust earnings across multiple sectors, said Siddharth Vora, fund manager and head of asset management at PL Capital.
Broader Participation
In China, where authorities and internet giants are vowing to ramp up AI investments, the picture is more complicated.
The largest companies in China are conglomerates with mixed revenue streams. But similar to other Asian markets, some of the best-performing stocks this year in China are those positioned to directly monetise the AI boom, such as intelligent processor maker Cambricon Technologies Corp., semiconductor foundry SMIC and optical fiber maker Yangtze Optical Fibre & Cable Joint Stock Ltd.
“Investors have therefore diverted their attention to companies that have clearer association to AI,” Fabien Yip, a market analyst at online brokerage IG International, said.
There is also investor rotation underway that may prove healthy. Beyond the old internet leaders, capital is flowing into banks, insurers, high-dividend state-linked names, hardware makers, as well as AI-adjacent stocks.
That broader participation helps explain why China has still delivered positive returns despite the declining market-cap share of its top ten companies, Chanana said. The CSI 300 Index has risen about 5 per cent this year.
“That de-concentration is not all the same,” she added.
