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.

ET Intelligence Group: Low beta stocks gain prominence in times of heightened market volatility. Amid rising geopolitical tensions, only 135 or over one out of every four stocks in the BSE 500 index have clocked 1% or higher returns over the past month and just 35 of them have gained in double digits. In either case, over half of the stocks sport a beta ratio of 0.9 or lower, signifying the rising importance of stocks that show lesser volatility than the broader market. The benchmark Sensex has lost nearly 6% during the period as investors cautiously assess the impact of the conflict in West Asia.

ETIG has identified 13 stocks that achieved double-digit returns across one month, year-to-date, and year-on-year periods. A majority of these companies have India-centric operations and have shown improving margins and impressive revenue and profit growth in FY26 so far. The list includes Hitachi Energy India, Finolex Cables, Aster DM, Krishna Institute of Medical Sciences, Linde India, Schaeffler India, Solar Industries, JB Chemicals and Pharmaceuticals, Great Eastern Shipping, and Vardhman Textiles among others.

In addition, six stocks currently trade near their 52-week highs notwithstanding the current market volatility. These include Hitachi, Aditya Birla Sun Life AMC, Schaeffler, Great Eastern Shipping, Vardhman, and JB Chemicals.

Hitachi Energy India topped the list with 34% month-on-month return. The stock of the company, which provides electricity grid management and automation solutions to the power sector, has nearly doubled in a year following strong financial performance supported by rising order book. It reported a record-high order backlog of around ‘29,900 crore at the end of December 2025.

Hitachi was followed by Finolex Cables and Aster DM Healthcare with monthly stock returns of 30% and 25% respectively.

A beta below one reflects stocks that are less susceptible to market fluctuations. The rising market volatility may affect a stock’s beta coefficient.
In the case of BSE 500 companies, the number of stocks having a beta of either 0.9 or lower now stands at 217 compared with 172 at the beginning of CY2026 and 204 a year ago.