This week, tech giants Amazon and Microsoft pledged an eye-popping $50bn-plus combined investment in India, putting artificial intelligence (AI) in the spotlight.
Microsoft's Satya Nadella announced his company's largest investment ever in Asia - $17.5bn (£13.14bn) - 'to help build the infrastructure, skills, and sovereign capabilities needed for India's AI-first future'.
Amazon followed suit, stating it plans to invest more than $35bn in the country by 2030, with a significant portion dedicated to enhancing AI capabilities.
The announcements arrive at a pivotal point in the market, as AI concerns loom large and tech stock valuations fluctuate. Many brokerage firms are taking a contrarian view on India's AI potential.
Christopher Wood of Jefferies characterized Indian stocks as a 'reverse AI trade,' suggesting that India will outperform other global markets if the AI bubble bursts.
HSBC echoed similar sentiments, viewing Indian equities as a hedge against current volatility in the AI sector.
Despite these promising investments, the Indian stock market has underperformed compared to its Asian counterparts, with considerable capital flowing into Korean and Taiwanese AI firms.
However, the significant influx of investments from Amazon and Microsoft provides a crucial stimulus, raising questions about India's position in the global AI race.
The road ahead indicates a swift adoption of AI in India, with investments trickling into data centres and chip-making facilities. Recently, Intel announced a joint venture with Tata Electronics to manufacture chips locally.
Yet, India still appears to be sprinting to catch up in developing a sovereign AI model. A year and a half ago, the Indian government initiated an AI mission supplying chips to start-ups, aiming for a large domestic model akin to OpenAI.
While the government is introducing a sovereign model supporting over 22 languages, its $1.25bn funding pales compared to France's $117bn and Saudi Arabia's $100bn investments.
These ambitions also face significant obstacles, including semiconductor shortages, lack of talent, and fragmented data systems, as highlighted by global consultancy EY.
India's investment in computational infrastructure lags behind the vast research efforts seen in the US and China. Furthermore, despite a high concentration of AI professionals, the nation struggles to retain this talent.
Although the tightening of overseas work visas creates an opportunity to attract back previously expatriated Indian talent, substantial policy incentives are essential to encourage relocation.
Countries such as China offer numerous incentives to retain talent, from financial support to fast-track immigration.
Indian AI freshers often find themselves literate in AI technology and innovations, yet these policies are still developing.
As per the Stanford AI Index 2025, India ranks among the top five globally for new AI investments and shows considerable engagement in AI research.
Furthermore, investments in AI startups doubled recently, indicating growing momentum in AI-driven consumer applications.
Innovative AI solutions in India seek to address pressing challenges, such as the MahaVISTAAR app, which provides crucial agricultural information to millions of farmers in the Marathi language.
Notwithstanding the challenges, India's ability to implement AI effectively could position it uniquely in the global landscape.
Nevertheless, India's growth in the IT sector, a key economic driver, faces impending disruptions from AI. Major firms are beginning to show vulnerability as the sector's growth slows, underscoring the imminent changes brought by AI technologies.
