Ask Onix
Tech giants pledge record AI investments in India
Microsoft and Amazon have announced combined investments exceeding $50 billion in India, focusing on artificial intelligence (AI) infrastructure and capabilities. The moves come as global markets grapple with AI-driven valuation surges and India seeks to strengthen its position in the sector.
Microsoft and Amazon outline multi-billion-dollar plans
Microsoft CEO Satya Nadella revealed a $17.5 billion investment-the company's largest in Asia-to bolster India's AI infrastructure, workforce development, and sovereign AI capabilities. Amazon followed with a commitment to invest over $35 billion in the country by 2030, though the exact allocation for AI remains unspecified.
India's AI paradox: Potential amid challenges
Despite rapid AI adoption, India lags in sovereign AI development. The government's $1.25 billion AI mission, launched 18 months ago, aims to create a homegrown model supporting 22 languages, but progress trails global leaders like OpenAI and China's DeepSeek. Analysts highlight hurdles including limited computational infrastructure, semiconductor shortages, and fragmented data ecosystems.
An EY report notes India's high concentration of AI talent-2.5 times the global average-but warns of brain drain due to insufficient policy incentives to retain skilled professionals. China, by contrast, offers financial subsidies, tax breaks, and fast-track visas to attract AI experts.
Market dynamics and investor sentiment
As fears of an AI bubble grow, brokerages like Jefferies and HSBC view Indian equities as a "reverse AI trade," suggesting the country could outperform if global AI valuations correct. Mumbai's stock market has underperformed peers in Korea and Taiwan, where foreign investors have poured billions into AI-driven tech firms.
The new investments may address this gap, though questions persist about India's long-term competitiveness. While 74 Indian AI startups secured funding last year, total private investment reached just $1.16 billion-far below the $100 billion raised in the U.S. and $10 billion in China.
Opportunities and risks in India's AI ecosystem
Experts argue India's strength lies in downstream AI applications rather than costly model development. Shailendra Singh of Peak XV Partners predicts AI will democratize entrepreneurship, citing a surge in AI-powered consumer apps and startups tackling local challenges, such as MahaVISTAAR, a Maharashtra government app delivering agricultural advice to 15 million farmers in Marathi.
"If AI can serve India's classrooms, clinics, and farms, it can serve the world."
Nandan Nilekani, architect of India's biometric program, in The Economist
However, AI threatens India's $250 billion IT services sector, which has driven economic growth and employment for decades. Jefferies warns of slowing growth, stagnant wages, and reduced hiring as AI disrupts traditional back-office functions.
Global comparisons and future outlook
India ranks among the top five countries for AI startup funding, according to the Stanford AI Index 2025, and accounts for 9.2% of global AI research publications. Yet, its $1.25 billion sovereign AI mission pales next to France's $117 billion and Saudi Arabia's $100 billion programs.
Despite constraints, India's AI progress-particularly in leveraging AI for social impact-positions it as a key player in the global landscape. The recent investments by Amazon and Microsoft signal confidence, but sustained policy reforms and infrastructure development will determine whether India can close the gap with AI frontrunners.
