Ruchir Sharma / Screengrab from YouTube (Nikhil Kamath)

Indian-American investor and author Ruchir Sharma argued that global equity markets are now outpacing the United States, challenging the long-held notion of American exceptionalism in finance. 

Speaking on the premiere episode of Nikhil Kamath’s new podcast WTF is Finance, Sharma said, “The only reason for investing in the US today is AI.”

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“If it weren’t for the AI mania, I think the American stock market would be down,” he remarked. While indices like the S&P 500 are up 8–9 percent this year, he pointed out that international markets are doing far better, with dollar-adjusted gains of nearly 20 percent.

He warned that the U.S. rally is dangerously narrow, powered almost entirely by a few AI-driven companies. “Outside AI, most U.S. stocks have barely moved,” Sharma said, comparing the situation to the dot-com boom where a handful of firms captured most of the value.

Sharma also expects the U.S. dollar to weaken over the next five to seven years as more countries diversify into gold and Bitcoin. “Crypto is here to stay—less as a payment tool, and more as a store of value against dollar dominance,” he observed.

American exceptionalism 

Sharma argued that slowing population growth, weakening immigration policies, and intensifying global competition are testing America’s edge. “The really underappreciated part of America’s advantage was demographics… that’s now changing,” he told Kamath.

He also pushed back against protectionist policies. “Generally, from a pure economic perspective, tariffs aren’t great. They’ve rarely helped countries in the long run,” he said, adding that East Asia’s success was built on open markets and competition, not protectionism.

India’s opportunity

Turning to India, Sharma identified manufacturing as the country’s biggest untapped opportunity. “Services dominate GDP, but those who crack manufacturing create disproportionate wealth. The number one sector today is manufacturing, number two is possibly pharma,” he said. He added that the number of manufacturing billionaires is rising fast and that if India “keeps opening up and stays competitive, this can be our moment.”

At the same time, he cautioned that India’s long-term growth is unlikely to exceed 6 percent without deeper reforms. “We are a 6 percent-type economy. The ambition of growing at 9, 10 percent doesn’t even exist anymore,” he noted, pointing to structural and political constraints that make China-style growth unfeasible.

On foreign investment, Sharma expressed concern over stagnant inflows. “As far as FDI is concerned, undoubtedly India’s rate has been a bit disappointing,” he said, noting that inflows remain about 1 percent of GDP—well below the 3–4 percent East Asia achieved during its high-growth phases.

He argued that India remains a difficult market for global investors. “You’re almost happier doing a portfolio or other investment, piggybacking on the existing local person who knows how to navigate this environment,” he observed.

Sharma also called for reforms in taxation and regulation, saying India “taxes far more than its income levels justify” and that rules “tend to favour incumbents, which hurts small companies and innovation.” He urged regulators to break monopolies and block large companies from constantly buying out competitors, describing this as “the best way to revive capitalism.”

India vs China

On China, Sharma said the country’s past success stemmed from the state stepping back during the Deng Xiaoping reforms, but that model has since been reversed. “They wanted to keep growing at 6 percent, 7 percent, 8 percent, and that led to a build-up of debt,” he said. He also flagged China’s shrinking population as a long-term drag, noting, “There is no country in the world which has grown rapidly without rapid population growth.”

By contrast, India’s demographic curve remains favorable. “In our lifetimes, India’s population will still be growing. We’re not even close to facing what China is facing,” he said. However, he warned that India cannot emulate China’s ruthlessness in firing millions to stay competitive: “India’s democracy doesn’t allow that kind of ruthlessness.”

Investment shift

Sharma said his own investment strategy is shifting towards undervalued markets in Southern and Eastern Europe, such as Spain, Greece, and Poland, as well as Latin America. “These regions have improving fundamentals and are off the radar for most global investors,” he said.

Summing up, Sharma urged investors to diversify away from the U.S. “Look beyond America. That’s where the value is,” he said.