The AI boom is now so powerful and widespread that it is overwhelming all other drivers of returns and shaping a new AI-based world order, according to Ruchir Sharma in a Financial Times article published June 29, 2026.
AI exposure drives market performance
The relative performance of the world’s major stock markets over the past year can be explained by how much exposure they have to AI. Nations with a large foothold in the “stack” of industries developing AI infrastructure and services are massively outperforming, while those without are lagging by record margins.
The winners include the U.S. and China, thanks above all to their foundational AI models; Taiwan and South Korea on the strength of chip manufacturers; Japan and Israel on a broad array of AI skills.
Partial winners and losers
The partial winners are secondary suppliers. They include nations that are exporters of circuits, servers and other AI-related electronic hardware — such as Mexico, Thailand and Vietnam — or that play a role in the AI stack as both exporters and sizeable bases for data centres, such as Malaysia and Singapore.
The losers include much of Europe, with the odd exception (the Netherlands is a major supplier of advanced chips from one big company). Worst off are those countries that lack “AI plays” and rely heavily on the industries most exposed to disruption, including IT services.
Concentration of returns
In the U.S., AI plays constitute more than 40 per cent of the market cap and have accounted for more than 80 per cent of the returns this year. The return and concentration profile is similar in Japan and even more extreme in South Korea and Taiwan. In China, all the action is taking place in newer growth-oriented segments of the market, while the old-economy sectors struggle. Meanwhile, the likes of India and the Philippines, which are perceived to be at the wrong end of the AI-wrecking ball, are well in the red this year.
Comparison with dotcom era
While the internet frenzy of the late 1990s was also an overpowering global phenomenon, it was not so narrowly focused. The leading tech subsectors back then were communications equipment, semiconductors and wireless telecom services, which accounted for 60 per cent of global market gains at the dotcom peak in early 2000. So far this year, the three leading tech subsectors (semiconductors, hardware and electronic equipment) have contributed a significantly larger share of global market gains, over 70 per cent.
Also, unlike the dotcom peak, when tech-fuelled returns were spilling across industries and markets, today they are sucking money away from non-AI industries and nations. Even in the U.S., investment outside of the tech sector is declining in real terms. Meanwhile, foreigners keep pulling money out of countries seen as peripheral to the AI boom, from the U.K. to Indonesia.
Characteristics of leading AI nations
Global investors may be focused almost exclusively on AI, but they are not choosing winners at random. The leading AI nations are long-established tech powers with a deep commitment to R&D, spending more than three per cent of GDP on average — over three times the level of lagging countries. They also invest heavily in technology, with tech spending averaging 3.7 per cent of GDP among AI winners, compared with 2.7 per cent for partial winners and 1.6 per cent for losers.
