Why US Earnings Growth Can’t Be Compared With India’s

Growth is growth. But a developing nation of 146 crore people is not a one-theme market.

The comparison doing the rounds is simple. S&P 500 EPS grew ~53% in April–June 2026. The Nifty managed 13–25%. So capital goes to America.

Yes, earnings growth is earnings growth. A rupee of profit and a dollar of profit both count. If we compare only growth rates, the comparison stands. But the moment part of that growth is circular, the two numbers stop being comparable. To see why, look at how the US number was made, and at who India has been compared with before.

India has always been compared with someone

A few years ago it was Korea, Brazil, Indonesia and South Africa. Today it is the US. Look at what those markets have in common: a handful of companies, often one theme, carrying the whole index.

Korea’s market leans on two memory-chip makers, Samsung and SK Hynix, at ~40% of the index. When doubts over the memory cycle hit in mid-2026, the KOSPI fell ~27% in under a month. Indonesia’s index, heavy with a few banks and conglomerates, lost ~35% in six months on doubts about free float and disclosure. Brazil fell ~14% in a single session on 26 October after its election. South Africa leans on one tech holding group for about a quarter of its market. Annexure F

The triggers differ: memory chips, governance, politics. The weakness is the same. When a market rests on a few pillars, one crack shakes the whole building.

How the US number was made

Out of 500 companies, the profit engine is one idea: AI. 21 AI-linked companies hold ~34% of the S&P 500’s value and earn ~38% of its profit. Annexure A That is not 500 companies growing together. It is one theme carrying the index, which is exactly the Korea pattern on a bigger stage.

Inside that theme, four Big Tech firms sit in a web of deals with the AI start-ups. Annexure B Strip away the press releases and there are only three ways it lifts their EPS:

Now do the division. In April–June 2026, ~$160 bn of Big Tech profit was paper gains on AI stakes, against roughly $864 bn of total S&P 500 profit. That is about 1 in every 5 dollars. Annexure C Not all US EPS is propped up. But a meaningful slice is, and it sits inside the companies that carry a third of the index.

The cracks are already showing

We are not saying the US market will fall or rise. But the AI trade is starting to wobble, and the wobble begins exactly where the paper gains were.

This week Alphabet reported its July–September results. Profit fell 25%. The same investment book that produced huge gains in April–June produced an $8.7 bn loss. Capital spending jumped to $51.4 bn, more than the cash the business generated. The share had its worst day on record. Annexure E

The next morning, Amazon and Intel flagged heavy cash burn, Nasdaq futures dropped about 2.5%, and the Nasdaq closed October down more than 5%. The market is now asking a simple question: show us the revenue.

That is the second lever running in reverse. Paper gains lift EPS on the way up. Paper losses cut it on the way down.

Who wins, and who pays

The winners today are the sellers of chips and cloud. Their order books are real and full. The payers are the AI model makers at the end of the loop. Their spending becomes everyone else’s revenue, and they are not yet earning it back.

Big Tech plans $660–690 bn of AI capex in 2026. The largest AI model maker lost more than it earned last year. Annexure D If their revenue catches up, the loop holds. If not, valuations fall and orders slow.

India is a different economy

India is the world’s most populous nation, and still developing. It has ~146 crore people, consumption at 61.5% of GDP, and income per person roughly one-thirtieth of America’s. Annexure H

That gap is the growth engine. Profits here come from first home loans, first two-wheelers, insurance policies, power connections and highways. Banks fund it, energy and metals feed it, autos and consumer companies sell into it. Services exports and a large, young, skilled workforce add to it. None of it depends on companies billing each other.

And the profit base is widening. The Nifty 50’s share of Nifty 500 profit fell from 87% to 51%, and mid- and small-caps delivered about two-thirds of FY26 profit growth. Annexure I

To be fair to both sides

US earnings are not fake. The other 493 companies also grew strongly, the chip and cloud sales are real, and the paper gains are legal and disclosed.

India is concentrated too, mainly in banks. Annexure G But banks lending to a growing economy is a very different risk from companies funding each other’s customers. And India has had its own bad year in some large stocks. A broad market does not mean a market that never falls.

What to watch

• Investment gains and losses in Big Tech results. If they keep swinging profit, earnings quality has not improved.
• Proof of AI revenue. The loop holds only if end-users start earning what they spend.
• The big AI listings. Public prices will test the private valuations behind last quarter’s gains.
• India’s FY27 earnings. Broad credit and consumption growth must show up in the numbers.