Beyond The Big Tech Bubble: Why Jefferies' Chris Wood Is Bullish On India, Gold, And Local AI

Investing conversations across the globe have centred around attempts to ride the artificial intelligence wave for the past two years. The interest has so far been led by the interest in markets like the US, where big-tech behemoths and AI pioneers have been the key interest area; popularly, these companies have been dubbed ‘MANGO’ (Meta, Anthropic, Nvidia, Google and OpenAI).

However, even as global markets remain focused on the artificial intelligence boom, Christopher Wood of Jefferies has stated in his latest Greed & Fear report that the most lucrative investment themes lie elsewhere. In his latest note, Wood has explained how a more diversified approach towards investing may lead to better results amid calls for slowing down the progress of AI.

India’s Industrial Revolution and Gold on Wood’s List
Wood’s diversified approach is a combination which favours India's physical industrial revolution, defensive assets like gold, and decentralised computing.

The Indian Industrial and Energy Boom

Wood explained that for him, the best structural growth story remains in India's power transition. He added that the subcontinent is expanding its manufacturing across four key sectors, which are semiconductors, solar panels, electronics, and aerospace. The new industrial push requires an unprecedented volume of electricity, creating an enormous tailwind for a more robust domestic power ecosystem.

In the note, Wood also reflected on his discussions in Mumbai and stated that the power infrastructure development happening in India outshines other top-down market opportunities.

"More days in India convince GREED & fear that the best structural growth story top down remains energy in terms of the private sector build out of electrification via the expansion of renewable energy, primarily in the form of solar," Wood said.

Notably, Wood also added that he has made a key change to his India long-only equity portfolio by adding transmission equipment specialist Hitachi Energy India.

Wood's bullish stance on India also extends to sectors that have been discounted by the market. While global and domestic funds have recently remained sellers of Indian information technology service providers, amid the fear of AI tools making traditional outsourcing models obsolete. Addressing the valuation discount, Wood described how sentiment has led to the de-rating of bellwether software exporters.

"Indian fund managers are treating the IT service stocks the same way foreign fund managers are treating India, namely as the reverse AI trade," Wood said.

Local AI Models Over Data Centres

While Wood is bullish on physical infrastructure in India, he also took a cautious view of the cloud computing trend underway in Silicon Valley. Rather than supporting runaway spending on centralised facilities, Wood expressed optimism around the adoption of small language models (SLMs), which run on local hardware. He expects these decentralised systems to provide enterprises with enhanced data security and reduced operating costs.

"SLMs are catching up fast in terms of performance with energy and compute costs that are between 50 per cent and 85 per cent lower," Wood said.

Since smaller models do not need massive server complexes, Wood warns that tech giants may have overextended themselves, leaving data centres vulnerable to becoming capital-destructive stranded assets.

Wood Bullish on Gold, Japanese Banks, and China Bonds

Outside of equities and technology, Wood also said that he favours defensive assets that can withstand the rising macroeconomic volatility as the United States Federal Reserve considers further rate hikes and foreign central banks actively offload American government bonds, alternative sovereign assets look increasingly attractive.

In response to shifting global reserves, Wood is bullish on physical gold, which continues to see aggressive accumulation from monetary authorities. Noting the sustained demand from Beijing, Wood pointed to official purchase numbers.

"The PBOC reported an increase of 20.2 tonnes of gold reserves to 2,387 tonnes at the end of August, the biggest monthly increase since October 2023," Wood said.

Alongside gold, Wood remained optimistic about Japanese megabanks. He noted that the cautious approach taken by the Bank of Japan regarding interest rate hikes keeps lender margins lucrative. Pointing to their sustained performance in recent years, the report highlighted the sector's strength.

"The megabanks have outperformed the Topix by 210 per cent since the beginning of 2021," Wood said.

Wood also maintained optimism about Chinese government debt. He observed that weak domestic credit data and slowing retail sales have kept the country's sovereign bonds well supported, providing a stable alternative to volatile Western debt. Summarising his stance on this specific fixed-income strategy, Wood confirmed his ongoing commitment.

"A 20 per cent weighting in the Chinese government bond is maintained in GREED & fear's global sovereign debt portfolio," Wood said.