Rising concentration in AI stocks poses a risk: Kunal Kapoor, Morningstar CEO
Kunal Kapoor, the CEO of Morningstar, voiced unease about the dangers of focusing investments heavily on AI stocks during his Mumbai trip. He stressed that lofty expectations might not always reflect in company profits, potentially leading to disappointing market outcomes. While praising India's compelling growth story, he remarked that its investment valuations do not stand up favorably against…
Mumbai-based Morningstar CEO Kunal Kapoor warns investors that growing concentration in artificial intelligence stocks may pose significant risks. While the CEO emphasizes that the AI sector is not doomed to fail, he argues that investors are overly optimistic about the speed at which AI's benefits will translate into company earnings.
Kapoor states that while the market assumes today's investment spending will eventually lead to stronger revenues, higher margins, and better productivity, such outcomes rarely occur in a straightforward manner.
The CEO highlights that the concentration of gains in a limited number of AI-linked companies has made global markets increasingly dependent on a narrow set of outcomes. Kapoor points out that while a thriving economy can support business growth, it does not automatically guarantee attractive investment returns. He notes that India remains expensive despite underperforming against global markets over the past two years, and that investors are willing to pay a premium for its growth story.
Kapoor advises that the critical factor for investors is the price they pay for investments. He observes that foreign portfolio investors (FPIs) have been net sellers of Indian equities since July 2025, selling a staggering ₹4.55 lakh crore worth of Indian equities as of October. The CEO emphasizes that sustained high oil prices could weigh on Indian earnings and investor sentiment, but stresses that long-term investment success in India depends on productivity, demographics, and economic growth rather than any single commodity cycle.
Brent crude prices have risen by more than 9% in the past month due to geopolitical tensions and concerns over supply disruptions in the Middle East. The global benchmark currently stands at $115.06 per barrel. Kapoor cautions that gold can serve as a diversifier rather than a growth asset, as investors seek protection from uncertainty. However, he notes that its role in a portfolio remains limited, recommending a modest allocation rather than a large exposure.
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