Global equity markets have entered a phase of heightened volatility as escalating geopolitical tensions and rising crude oil prices triggered a sharp sell-off across major financial centres. From Asia to the United States, markets opened the week under pressure, reflecting growing investor anxiety over the economic fallout of a prolonged conflict and tighter energy supplies.

The risk-off mood has been visible across asset classes. Asian markets witnessed steep declines, with Japan’s benchmark plunging sharply while Hong Kong and mainland Chinese indices also slipped. Futures for Indian equities signalled a weak start as investors reacted to the negative global cues and uncertainty surrounding the trajectory of the conflict.

Market participants say the biggest concern now is that the conflict, which many initially believed would be short-lived, could drag on longer and create broader economic disruptions. According to Rajeev Agrawal from DoorDarshi India Fund, the consequences could be particularly severe if oil prices remain elevated for an extended period.

“This war was initially expected to be short, but things are becoming worse by the day,” Agrawal said, warning that tight oil markets could quickly create problems for many economies, including India.

The sharp fall in global equities has left investors grappling with a critical question: whether to protect capital by booking profits or to use the correction to deploy fresh money.

Rather than reacting impulsively to volatility, Agrawal emphasised the importance of portfolio rotation. “In such situations we rotate our capital,” he said, explaining that investors should gradually sell stocks that appear fully valued and redeploy the proceeds into companies that have become more attractive after the correction.
Periods of broad market stress, he noted, often push down prices across sectors, creating opportunities for long-term investors willing to look beyond near-term turbulence.Agrawal believes that certain sectors could prove relatively resilient despite the challenging macro environment. Financials, for instance, may not be as directly affected by rising oil prices compared to other parts of the economy.

“Financials will of course feel the impact if the economy slows, but the downside can sometimes be exaggerated in such market conditions,” he said, adding that this is where investors can selectively “cherry pick” opportunities.

Another theme he highlighted is renewable energy. With oil prices surging, the push for alternative energy sources could gain momentum, particularly in countries like India that are heavily dependent on energy imports. Investments in renewable energy, he said, could therefore benefit from the current global backdrop.

Even so, Agrawal cautioned against trying to perfectly time the market bottom. “It is very hard to know when the dust will settle,” he said, noting that unexpected developments can quickly change market direction.

Instead, he advocates a disciplined investment approach—maintaining some cash while gradually deploying capital during market declines. Investors should “start nibbling into positions” that have become compelling while also ensuring they retain enough liquidity to act on future opportunities.

In an environment where geopolitical shocks and energy markets are driving volatility, the strategy for investors may not lie in predicting the next market move, but in staying patient, disciplined and prepared to rotate capital as opportunities emerge.

Calamos Investments is a diversified global investment firm offering innovative investment strategies including U.S. growth equity, global equity, convertible, multi-asset and alternatives. The firm offers strategies through separately managed portfolios, mutual funds, closed-end funds, private funds, an exchange traded fund and UCITS funds. Clients include major corporations, pension funds, endowments, foundations and individuals, as well as the financial advisors and consultants who serve them. Headquartered in the Chicago metropolitan area, the firm also has offices in London, New York and San Francisco.  For more information, please visit www.calamos.com.

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The rapid rise of artificial intelligence companies has triggered a fresh debate among global investors, particularly as scrutiny intensifies over the massive capital expenditure by large technology firms. According to Christopher Wood from Jefferies, the most intriguing development in the AI story so far is the emergence of Anthropic, a company he believes could play a pivotal role in shaping the sector’s future.

Speaking in an interview with ET Now, Wood said the flow of global news continues to be heavily influenced by political developments in the United States, but the AI sector remains the more compelling long-term narrative.

“Mr Trump continues to drive the news flow. But in the big picture Anthropic is the most interesting company to come out of this whole AI story. But the US defence sector getting involved does remind me of The Terminator movie. One of the great movies of all time, which is looking more and more prophetic. I am talking about the original Terminator,” Wood said.

The discussion around Anthropic has intensified recently amid speculation over regulatory scrutiny and geopolitical implications surrounding advanced AI development. While the concerns are still evolving, the broader conversation has quickly expanded into questions about whether the AI boom that propelled US technology stocks could face a reality check.

When asked whether the ongoing developments could challenge the dominant AI narrative that has powered US equities, Wood acknowledged that investors are beginning to question the massive spending spree by technology giants.

“Well, I think what has happened this year is that we have had a three-year AI capex race which was kicked off at the beginning of 2023 when the market suddenly focused on AI because of Microsoft’s purchase into ChatGPT,” Wood said.
He explained that the world’s largest technology companies — often referred to as hyperscalers — responded to the AI boom with an unprecedented surge in capital spending.“Then the hyperscalers responded with this huge capex binge which in my view was driven more by a negative driver than a positive one. Obviously, AI is a big opportunity, but the key thing the hyperscalers were responding to was the threat of disruption. And there is one thing these guys in Silicon Valley are obsessed with, it is disruption,” he said.

According to Wood, the scale of investment has become enormous. “This year they are projecting spending $620 billion, that is the four hyperscalers alone.”

He noted that the market has already started to question whether the heavy spending will translate into meaningful returns.

“Actually, we have started to see the market question the returns from the capex with the first quarter earning season. But the key word is start,” Wood said, adding that scrutiny is likely to intensify in the coming months.

Wood believes the bigger question investors must consider is whether the economics of AI will resemble those of the internet boom or something very different.

“The internet economy was about winner takes all. Once Google was search, Facebook are the best examples. All the extra revenue went to the bottom line. Whereas right now AI is looking more like the airline industry — capex intensive but not necessarily very profitable,” he said.

Another challenge, according to Wood, is the lack of a clear “killer application” for AI chatbots so far.

“So who is really making money out of these chat boxes? It is not really clear. What is the killer app of a chat box? So far, I would say the killer app of OpenAI is letting kids cheat on their homework but there is no real killer app,” he said.

However, he pointed out that monetisation appears more visible in enterprise markets.

“Where we see evidence of monetisation is in the corporate market and that is Anthropic, not OpenAI,” he said.

Anthropic has drawn significant attention in the technology ecosystem, particularly because it was founded by former OpenAI researchers and engineers. The company has increasingly positioned itself as a competitor in the generative AI space.

Wood said that talent migration within the industry has also been noteworthy.

“Anthropic is the most interesting company to have come out of this AI story so far and obviously the interesting point about Anthropic is they came out of OpenAI. So actually, most of the tech talent which built OpenAI has left OpenAI,” he said.

Wood added that if given a choice between the two companies from an investment perspective, his preference would be clear.

“If you ask me to invest in Anthropic or OpenAI, I am definitely investing in Anthropic,” he said.

Beyond individual companies, Wood also believes that the dominance of US equities in global markets may have already peaked. He noted that US stocks reached a record share of global market capitalisation late last year.

“To be precise, the US peaked at 67% of world stock market capitalisation measured by the MSCI All Country World Index in December 2024. In my view, that is the all-time peak,” he said.

According to him, that extraordinary share reflects the overwhelming dominance of large technology firms in global indices.

However, Wood cautioned that the massive AI spending could change the financial dynamics of these companies.

“A lot of money is going to be wasted. And they are going from free cash flow generating machines into very different businesses. They have exited their moats. They are all converging on the same area and I do not think they are all going to succeed in this endeavour,” he said.

Despite his broader concerns, Wood said that if he had to own one hyperscaler stock, his preference would be Alphabet.

While the AI debate has largely focused on technology stocks, Wood also warned that the biggest financial risks may lie elsewhere — particularly in private markets.

He explained that the software sector has already started to face pressure as investors question whether artificial intelligence could disrupt traditional software businesses.

“Conceptually the issue is now will AI eat software? Now, I am not an expert on this area but it kind of makes intuitive sense that AI could eat software,” he said.

Such a shift could have major implications for the private equity industry, which has heavily invested in software companies in recent years.

“The sector which private equity is most invested in is software and we are talking about leverage buyouts of software companies. Now doing an LBO on a software company is to me self-evidently risky,” Wood said.

He added that the growing private credit market has also become deeply intertwined with private equity financing.

“Seventy percent of private credit is funding private equity. So in reality private equity and private credit are joined at the hip and that is where we can get financial collateral damage from this AI story because this is actually the real bubble,” he said.

Interestingly, Wood does not believe the AI boom itself fits the definition of a classic financial bubble.

“AI is not a classic bubble because most of the capex has been funded by cash,” he said.

However, he noted that private credit has increasingly begun financing AI investments as well, potentially increasing systemic risks if sentiment turns.

“If that unwinds sharply, then that can cause a quicker unwind of the AI trade,” he said.

Wood also highlighted structural characteristics of the US equity market that could amplify volatility if investor sentiment shifts.

“There is a risk that the US stock market sells off more than the fundamentals warrant. The reason why that risk exists is that the US stock market is extremely retail driven, much more retail driven than the Indian stock market,” he said.

He added that passive investing has also grown significantly in the United States.

“I believe at least 50% of the market is passive, which means people are mindlessly buying stocks just because they are in a particular index and that means that everybody owns the same stocks,” he said.

Combined with algorithmic trading, this could accelerate market swings.

“In a panic it can unwind much more than warranted by the fundamentals,” Wood said.

While the AI narrative continues to dominate global markets, Wood believes the early signs of scepticism are beginning to emerge. Whether that evolves into a broader correction will depend largely on one key factor — whether the enormous spending on artificial intelligence ultimately produces meaningful financial returns.