Singh said the recent pause in U.S. markets was “more propelled by short positions,” triggered by “buying put options by one of the prominent big short investors” who targeted names like Peloton, Palantir, and Nvidia. “People are beginning to question the AI story and the kind of investments that are going into it,” he noted.
Still, Singh called the correction justified and not alarming. “Most of the gains in the last two years are prominently coming from these five to seven companies, so that is a bit of a breather. It is fine. It is justified as well, but that is not something to worry about,” he said.
He also pointed to potential macro positives ahead. “If tariffs are unwound, inflation will drop precipitously and the Federal Reserve will continue to cut the rates,” he said, referring to the US Supreme Court’s recent leanings toward curbing unilateral presidential tariff powers.
Is there a bubble is?
Singh differentiated between established tech giants and speculative plays. “The Fab 7 is not a bubble,” he said, explaining that while valuations of companies like Nvidia or Tesla may be debatable, he said, “Can you value a hardware company like a software company? I am not sure,” and others, such as Apple, Google, and Meta, continue to justify their strength.
“These companies are still at multiples of 25 to 30, and they have such strong competitive moats and they have no near competition in sight,” Singh said. “All of the investments that are going into AI are coming from their balance sheet… At worst, they will slow down their investments, which is even better. The companies will pass on more profits to the investors.”Where Singh does see froth is in smaller, speculative corners of the market. “Quantum computing—there are certain stocks which have gone 3,200% in one year, and that is a bubble,” he said. “Some of the rare earth companies were $1-2 stocks, now they are $35, $40, $50—that is a bubble.”
India needs another year of absorption
On India, Singh said, while the structural story remains intact, valuations are demanding. “I am a firm believer that the India story is there, but the number is nominal growth of 10%,” he said. “After a moderation of a year, now they look something like this, about 12% for Nifty in six years, 22% for mid and small, and Nifty 500 looks like 15%.”
He argued that the market could benefit from consolidation. “I would be very happy if we have another year of absorption in the Indian markets and things would then look very-very attractive,” Singh said, warning that “nobody values [mid and smallcaps] like the way they are being valued in India.”
FII story is a distraction
Singh played down the importance of foreign institutional investors in the current cycle. “I always count FII story as a distraction,” he said. “Domestic institutional investors have bought collectively about $70 billion this year. FIIs have just sold $17 billion. So, who has sold the rest of the $53 billion? That is all domestic.”
Calling India “the IPO capital of the world today,” Singh cautioned that while that benefits sellers, “that is not good for the investor overall.” He concluded, “Moderation is good. It will be good for the long-term investor. Why do you want a short-term return unless you want to just cash out and you are sitting on a bubble—that is not the case.”
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Singh said he remains selectively positive. “The sectors I like, I like healthcare. I like private banks. But outside of that, this is time to be a little cautious. There is no meaty return left in the market for now that investors should jump there.”