Nearly 90 per cent of AI funding in India has gone into application-layer companies, in contrast to the US where around 85 per cent of funding has been directed towards infrastructure and foundation models, according to investment banking firm Avendus Capital.
In its August 2026 report, Avendus said the difference highlights a distinct growth path for India’s AI ecosystem as capital, talent, digital infrastructure and ecosystem maturity come together.
“India’s AI ecosystem will evolve differently across every layer of the stack,” the report said, adding that understanding the development of these layers and identifying where sustainable competitive advantages emerge will be key to assessing India’s AI opportunity.
The report said Indian AI companies have already created more than USD 9 billion in value, although the sector is still at an early stage.
According to Avendus, India’s current AI cycle is different from earlier technology waves such as the internet, mobile and cloud, as the country now has a more mature technology ecosystem.
Previous technology waves created nearly USD 200 billion in market value in India, with the internet, mobile and cloud contributing more than USD 50 billion, USD 100 billion and around USD 50 billion, respectively, the report said.
Avendus said India’s AI opportunity is expected to emerge across multiple layers, including applications, middleware, models and infrastructure.
At the application level, the firm identified vertical AI, consumer AI products designed for Indian users, agentic AI products and back-office automation as key areas of opportunity.
In the middleware segment, it highlighted AI inference optimisation, smart routing, testing and quality assurance, security, and data-context platforms.
At the infrastructure and model levels, sovereign AI emerged as a key investment theme, according to the report.
Avendus also highlighted the potential for AI platforms that can organise, contextualise, retrieve and monitor enterprise data as businesses increase their adoption of AI.
“The conditions that were missing in previous technology cycles — capital, talent, infrastructure and ecosystem maturity — are now converging for the first time,” the report said.
The report said India’s AI opportunity should be assessed on its own terms, as the development of each layer of the AI stack is likely to determine where future value is created.
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