Microsoft, Amazon make big bets, but where does India stand in the global competition?

Artificial intelligence (AI) has been thrust into the spotlight this week with tech giants Amazon and Microsoft committing a jaw-dropping joint investment of over $50 billion in India.

Microsoft’s Satya Nadella Announce His company’s largest-ever investment in Asia – $17.5bn (£13.14bn) – “helps build the infrastructure, skills and sovereign capabilities India needs for an AI-first future”.

Amazon followed suit, saying it would invest more than $35 billion in the country by 2030, with an unspecified amount of an unspecified amount of that investment going toward boosting artificial intelligence capabilities.

These announcements come at a particularly interesting time.

As fears of an AI bubble sweep global markets and tech stock valuations soar, several leading brokerages have taken a contrarian view on India’s AI prospects.

Christopher Wood of Jefferies said the country’s stocks were “reverse AI trading”. This basically means that “if AI trade suddenly relaxes”, or simply, the global bubble bursts, India should outperform the rest of the world’s markets.

HSBC shares a similar view, saying Indian stocks offer “hedge and diversification” for those nervous about the continued rise in artificial intelligence.

Mumbai’s stock market has lagged its Asian peers over the past year as foreign investors poured billions of dollars into artificial intelligence-driven technology companies in South Korea and Taiwan, while India lacked similar opportunities.

Against this backdrop, investments from Amazon and Microsoft provide a much-needed boost – but it’s still worth asking where India really stands in the global AI race.

There are no easy answers.

Artificial intelligence is being adopted rapidly in India. Investments in certain parts of the value chain – e.g. data centerThe physical backbone of AI, chip manufacturing facilities, are already beginning to come online. Just this week, U.S. chipmaker Intel announced a partnership with Mumbai-based Tata Electronics to manufacture chips locally.

But when it comes to sovereign AI models, India appears to be continuing to catch up.

About a year and a half ago, the Indian government launched a Artificial Intelligence Mission Through it, it started supplying high-end computing chips to startups, universities and researchers to develop large-scale homegrown artificial intelligence models, such as OpenAI or China’s DeepSeek.

According to the Federal Ministry of Electronics, the sovereign model supporting more than 22 languages ​​will be launched soon. But in the meantime, companies like DeepSeek and OpenAI have made further progress, launching newer variants.

While the government has recognized the need to reduce overreliance on foreign platforms due to the risk of surveillance and sanctions, India’s $1.25 billion sovereign mission pales in comparison to France’s $117 billion or Saudi Arabia’s $100 billion plans.

Global consultancy Ernst & Young said China’s ambitions face many other obstacles – from semiconductor supplies to skilled talent and a fragmented data ecosystem.

India currently lacks adequate computing infrastructure and decades of billions of dollars in R&D investments that have given China and the United States a clear advantage.

Despite India’s global advantage in AI talent, it still struggles to keep its developers at home.

“The current tightening of overseas work visas provides India with a window of opportunity to retain domestic talent and attract talent of Indian origin. However, given the global mobility of top AI talent, attractive policy incentives are needed to motivate them to migrate to India,” the EY report said.

China, for example, offers a range of incentives such as “financial support and subsidies, tax incentives and R&D funding, special talent visas and fast-track immigration,” the report said.

The concentration of professionals with AI skills in India is much higher than the global average, specifically, 2.5 times higher. Policies to retain this talent are not yet in place.

However, a study by the United Nations Conference on Trade and Development (UNCTAD) shows that despite the challenges, India and countries such as Brazil and the Philippines have achieved extraordinary results in artificial intelligence, especially in their economic development stages.

According to the widely followed Stanford Artificial Intelligence Index 2025, the country ranks among the top five globally for new companies receiving investment in artificial intelligence.

Last year, 74 new Indian AI startups received funding — a fraction of the more than 1,000 funded startups in the United States.

Indian AI startups have raised just $1.16 billion privately, compared with more than $100 billion in the U.S. and nearly $10 billion in China.

But India’s intellectual engagement with AI is high, with the country accounting for 9.2% of AI article publications, slightly ahead of the United States but behind Europe and China, according to the Stanford Artificial Intelligence Index.

Experts say India’s AI advantage may lie less in building expensive language models and more in using them downstream to spur entrepreneurship.

Shailendra Singh, managing director of Peak XV Partners, which invests in artificial intelligence startups, told the BBC: “I think in the short term, artificial intelligence will be concentrated in the United States. But in the next 5-10 years, artificial intelligence will have a huge democratizing impact on the creation of new companies. There will be a large number of small founders and entrepreneurs, and the downstream impact on places like India and Asia-Pacific will be staggering.”

Singh said there has been a surge in AI consumer applications in India, with investment in AI startups doubling from last year.

Additionally, many Indian startups are now using AI to solve real-world challenges where millions of people are still on the other side of the digital divide.

For example, MahaVISTAAR is an AI application run by the Maharashtra government that provides important agricultural information in the local Marathi language, reaching more than 15 million farmers.

Nandan Nilekani, architect of India’s biometrics project, wrote in Artificial Intelligence: “The hardest places for AI to make a difference are also the places where it will be most important. If AI can serve India’s classrooms, clinics, and farms, it can serve the world.” The Economist magazine last month.

As apps like MahaVISTAAR show, some of this is already starting to happen.

Artificial intelligence brings new opportunities but could disrupt India’s IT services industry, which has driven the country’s economy and created millions of jobs over the past three decades.

Jefferies said India’s multi-billion-dollar IT companies will become a key area of ​​”vulnerability” as artificial intelligence disrupts some business functions in the country.

This vulnerability is already showing.

Growth of IT back office in India slowStock markets are underperforming, hiring is down and wages are stagnant as the specter of new disruptors looms.

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