India Emerges as Key AI User Hub; AI-First Firms Better Placed to Weather Market Shifts The investor conversation around it has matured, with the focus no longer on whether a startup uses AI, but on whether it shapes how the business operates.
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The global markets today are being driven by one dominant force - Artificial Intelligence (AI). From hyperscalers accelerating capital expenditure to an unprecedented surge in semiconductor-driven equity valuations, the AI trade has reshaped capital flows, investor sentiment, and global asset allocation, according to a whitepaper released by Bay Capital Advisors.
"If 'Sell India' was the allocation choice for investors seeking AI exposure, then 'Buy India' should logically become the preferred choice when the AI hype reverses," said Keyur Majmudar, Managing Partner, Bay Capital Investments Advisors, the author of the research.
However, experts view India as a strategic outlier due to its limited representation in semiconductors, data centres, AI infrastructure, or foundational model development. According to the whitepaper, this resulted in a sustained outflow of foreign portfolio investments (FPI), amounting to ~USD 23 billion in 2024 and ~USD 13 billion (CYTD 2025), despite showing strong domestic fundamentals.
"A reversal of the hype could lead to India coming back into focus in the portfolios of large global allocators," said Majmudar.
Globally, a circular pattern of ecosystem financing has emerged. A great example is Nvidia investing in OpenAI - OpenAI using Capital to purchase chips from Nvidia - cloud service providers partner with OpenAI to build AI capacity - in the end, accelerating chip demand.
The research pointed toward OpenAI's USD 300 billion cloud infrastructure deal with Oracle adds another layer to this "self-reinforcing cycle."
Recent statements made by industry giants such as Mark Zuckerberg and Sunder Pichai reveal their concerns caused by investor enthusiasm leading to "irrational exuberance. However, it is imperative that the leading experts think that getting left behind in the AI race is the bigger threat.
In September 2025 alone, foreign investors put USD 15 billion into Taiwanese equities, marking the highest quarterly inflow on record, while South Korea registered its strongest FPI positioning in over 12 years, according to the report.
India experienced a sharp contrast, with 24 consecutive sessions of net FPI selling, the longest recorded since 2008. The whitepaper said that despite the exodus, the country's domestic market displayed resilience.
In sharp contrast, India witnessed 24 consecutive sessions of net FPI selling, the longest stretch since 2008. Yet, despite this exodus, India's domestic market displayed remarkable resilience.
According to Bay Capital's data, SIP inflows rose to INR 21,000 crore per month, mutual fund AUM surged to INR 65 lakh crore (up 27 per cent YoY), and India stood out as the only emerging market "where robust domestic liquidity fully absorbed sustained FPI selling, a structurally unprecedented phenomenon."
"While India may not be building foundational AI infrastructure, it is rapidly emerging as an interesting AI application economy, creating a powerful efficiency multiplier across its vast domestic market," said Majmudar.
From a debt-capital point of view, by 2026, the investor conversation around it has matured, with the focus no longer on whether a startup uses AI, but on whether it shapes how the business operates.
Eklavya Gupta, Co-founder and Co-CEO, Recur Club, "AI native and AI-integrated companies offer greater clarity on demand, costs, and cash flows because decisions are guided by real-time data rather than assumptions. From an investor's perspective, this clarity directly improves capital efficiency. When founders use AI to anticipate performance, manage risk, and optimise operations early, growth becomes more measured and predictable. That discipline is what supports long-term value creation."
"The real advantage of AI-led businesses is resilience. Companies built with AI at the core are better equipped to respond to market shifts, making them structurally stronger and more sustainable over time," added Gupta.
