3 weeks ago
AI Bubble Burst and Its Impact on Indian Stock Market
Imagine everyone wanted to buy the same popular toy until the price became too high.
Then many people changed their minds and wanted to sell it.
That is what happened with the 'AI trade' in the stock market, and the bubble of excitement burst in June 2026.
Shares of big AI companies went down in America, Korea, Japan, Taiwan, and China.
India's stock market stayed fairly flat, which was actually good compared with other countries.
Money that had been leaving India is now starting to come back, with more than two billion dollars flowing in since 22 June.
Experts say India could become a popular place for investors as the AI excitement cools down.
But the AI trade might not be completely over, and a US-Iran agreement about the Strait of Hormuz could affect oil prices and the world economy.
So investors are watching India closely as a potential new favorite.
The AI trade peaked around 22 June 2026, after which the Nasdaq slipped roughly 8% from 26,518 to 24,443 before paring losses on value buying.
Asian markets at the epicentre of the AI boom corrected sharply: Korea's Kospi fell over 38%, Japan's Nikkei over 14%, Taiwan around 16%, and China's Shanghai Composite around 8%.
SK Hynix shares crashed about 35% in one month and Baidu remained down 3%, while Alphabet, Meta Platforms, and AMD delivered zero returns over the past month.
Since 22 June, foreign institutional investors have turned net buyers in India with inflows of over US$2 billion, while Korea, Taiwan, and Japan saw outflows of about US$25 billion, US$30 billion, and US$7 billion respectively.
Experts say the AI trade may not be over but capital rotation towards under-owned markets like India has begun, with the US-Iran agreement on the Strait of Hormuz key to sustained FII inflows.
- Who
- Global investors and AI-heavy companies including SK Hynix, Alphabet, Meta Platforms, AMD, and Baidu, with commentary from Indian market experts N. Aruna Giri and Anuj Gupta.
- What
- The burst of the AI trade bubble triggered sharp corrections in global equities and a rotation of capital towards the Indian stock market.
- Where
- US, South Korea, Japan, Taiwan, China, Hong Kong, and India.
- When
- After the AI trade peaked around 22 June 2026, with data as of 29 July 2026.
- Why
- Crowded AI positioning began to unwind, prompting investors to rotate towards under-owned markets like India; continued inflows depend on the US-Iran agreement over the Strait of Hormuz.
Key facts
- AI trade peak
- Around 22 June 2026
- Nasdaq move
- Fell ~8%, from 26,518 to 24,443, then pared losses
- Kospi decline
- ~38%+
- Nikkei decline
- ~14%+
- SK Hynix one-month fall
- ~35%
- FII inflows into India since 22 June
- Over US$2 billion
- Outflows from AI-boom markets
- Korea ~US$25 billion, Taiwan ~US$30 billion, Japan ~US$7 billion
- Data as of
- 29 July 2026
Quotes
N. Aruna Giri
Founder & CEO of TrustLine Holdings
“The Indian stock market stands to benefit as the contra‑AI trade once the crowded AI positioning across global markets begins to take a pause. While it is still early days, the data is increasingly pointing in that direction.”
livemint.com
Sources
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