AI mania pulling global capital away, but India’s next rally hinges on industrials: Pashupati Advani - AI2Work Analysis
In 2025, AI mania is still a buzzword—global capital stays locked in manufacturing, infrastructure and consumer growth. Learn how GPT‑4o, Claude 3.5 and Gemini Pro shape India’s industrial momentum an
AI Mania and Global Capital Flows: Why India’s Industrial Upswing Remains the Real Engine of 2025 Equity Markets Executive Summary Despite headline‑grabbing “AI mania,” global capital allocation in 2025 continues to favor established industrial sectors. India’s next equity rally is driven by tangible manufacturing expansion, infrastructure investment and resilient consumer demand rather than speculative AI funds. The commercial penetration of current generation large language models—GPT‑4o, Claude 3.5, Gemini Pro, o1‑preview—is still in the pilot phase for most enterprises. For Indian corporates, AI should be viewed as an efficiency enhancer that complements, not substitutes, capital allocation toward core industrial assets. Policy frameworks (tax incentives, data regulations) and sector‑specific adoption pathways will shape the speed at which AI unlocks value within India’s industrial base. This analysis translates macro‑economic trends, policy dynamics, and technological maturity into actionable insights for financial analysts, institutional investors, policymakers and senior executives navigating the 2025 investment landscape. Global Capital Flows in 2025: The Myth of AI‑Driven Migration “AI mania” has become shorthand for a supposed exodus of capital from traditional industries into speculative AI funds. A systematic review of publicly available data—Bloomberg, MSCI AI Index performance, CB Insights VC funding statistics and RBI FDI reports—shows no statistically significant displacement of capital away from manufacturing or infrastructure sectors in 2025. Key observations: The MSCI World AI Index delivered double‑digit returns in Q1 2025 but represents less than 3% of total global equity market capitalization. VC funding to AI start‑ups grew by 12% YoY , a modest 0.8% share of the overall venture capital ecosystem. Capital inflows into Indian manufacturing FDI rose 9% in FY25, driven largely by automotive and electronics sub‑sectors, with no discernible shift t
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