India’s AI Valuation: Cloud Dominance, Model Lag

India is home to 22 artificial intelligence (AI) producing firms, securing the seventh global rank by aggregate AI-firm valuation according to a new Bank for International Settlements (BIS) working paper. However, this significant valuation is almost entirely concentrated within the cloud and infrastructure layer, largely attributed to the classification of major IT services companies.

India’s Global Position in AI Production

The ‘Geography of AI Firms’ study, from the Bank for International Settlements (BIS), mapped 1,246 AI-producer firms across 32 economies, each valued over $500 million. India’s position places it alongside Canada, while trailing countries such as Japan, the UK, and Israel in the number of firms.

The study highlights specific metrics for India’s AI sector:

• 22 AI-producing firms are based in India.

• The country ranks seventh globally by aggregate AI-firm valuation.

• India’s valuation surpasses both the UK and Canada.

The Composition of India’s AI Valuation

The unique structure of India’s AI industry reveals that nearly all its AI-firm valuation resides in the cloud and infrastructure layer. This concentration is largely due to the inclusion of major information technology services firms, such as Wipro and HCL Technologies, which primarily engage in systems integration and cloud consulting.

Consequently, India registers a negligible valuation within the critical domain of AI models and maintains only a limited presence in computing infrastructure. This indicates a focus on implementation and support rather than core AI innovation.

Investment Dynamics and Revenue Contribution

Further analysis from the paper shows that AI firms contributed less than 6 percent to India’s total listed-company revenue in 2024. This figure is notably lower compared to the contributions observed in the US and Korea.

India also presents an unusual investment profile, demonstrating a significant lack of home bias:

• 41.7 percent of investment deals from Indian AI firms were directed towards US-based targets.

• Only 27.9 percent of deals were invested domestically within India.

• The acquisition strategy prioritizes capabilities over reinforcing existing strengths.

• Applications accounted for 52.6 percent of these deals.

• Infrastructure deals represented 15.5 percent of the total.

The study concludes that venture-capital inflows, rather than traditional bank credit, correlate with the establishment and growth of AI firms in an economy. India’s unique position, marked by a strong presence in AI services but limited core AI model development and a preference for foreign investment targets, shapes its trajectory in the global artificial intelligence landscape.