Mark Mobius calls India top emerging market; cautious on AI bubble, bullish on gold

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Veteran Investor Mark Mobius

Veteran investor Mark Mobius has identified India as the number one emerging market, citing its demographic advantages and potentially revolutionary developments as key drivers for future growth. In an interview with CNBC TV18, the Chairman of the Mobius Emerging Opportunities Fund shared his comprehensive outlook, touching upon the artificial intelligence (AI) boom, his investment strategy in India, his caution on financials, and his views on gold and cryptocurrencies.

Addressing the fervent buzz around AI, Mobius acknowledged that the sector is in "bubble-like territory" due to widespread hype. However, he distinguished the current situation from the dot-com bubble, noting that AI is here to stay and is penetrating almost every industry. "There's no question that the AI revolution is here to stay and will continue," he stated, while advising investors to be selective. He cautioned that some companies are overstating their AI expertise. Mobius recommended focusing on firms genuinely developing AI systems and also considering peripheral players crucial to the ecosystem, such as those in hardware, chips, and power systems. He cited TSMC as a prime example of a sophisticated company essential for producing AI chips.

Turning his focus to India, Mobius expressed strong optimism, declaring it "the most important market in emerging markets." He attributed this to its large, youthful population and ongoing developmental strides. Despite recent reforms, he believes "a lot more to be done," particularly in simplifying bureaucracy to attract more foreign investment, which he predicts will fuel "incredible growth" in the Indian hardware sector. Currently, his fund allocates about 20% to India. "Probably 30% would be a good weighting." he said.

His primary focus is on software and hardware companies. He mentioned Infosys as a noteworthy company and expressed significant interest in unlisted firms, such as those manufacturing hardware for Apple or developing software for chips, seeing them as major future growth areas.

When asked about the perception that India is a net AI loser, Mobius countered that the country's vast population of 1.4 billion people will drive massive AI adoption. He also believes India is poised to expand its hardware and software production, potentially taking over market share as China's global impact wanes.

However, Mobius maintains a cautious stance on the Indian financial sector. "Generally speaking, we shy away from financials from banks," he said, explaining they can be "somewhat opaque" and it is difficult to assess underlying issues like non-performing loans. He viewed the recent wave of mergers and acquisitions in the space not necessarily as a sign of health, but as a potential indicator that some firms require mergers to survive, warranting investor caution. He did concede that new financial companies using AI to service customers could present future opportunities.

On traditional assets, Mobius remains bullish on gold, even after its significant rally. He recommends a 10% allocation of personal assets to the precious metal, believing it will continue to perform well in US dollar terms due to the global proliferation of the currency. While anticipating corrections, he sees a continued uptrend and, when asked about gold reaching $5,000 an ounce in the next 12 months, he replied, "Why not? There's no reason why it can't get to that level."

Finally, discussing themes from his book, "The Digital Currency Revolution," Mobius affirmed that cryptocurrency is here to stay. He highlighted that the most critical development is central banks worldwide creating their own digital currencies to control the monetary system and compete with independent cryptos. This is creating a dynamic where government-controlled digital currencies will coexist with decentralised alternatives like Bitcoin, which appeal to users seeking financial privacy. "It's going to be a very interesting development going forward," he concluded.