India's AI Investment Surge: Bright Future Amid Funding Slump

Published Date: 21/07/2024

India's generative AI startups saw a two-fold increase in investments in the first half of 2024, despite a 50% decline in funding rounds. OpenAI, Accenture, and TCS are leading the charge.

The Indian technology industry has witnessed a surge in investments in generative AI startups, with a two-fold increase in the first six months of 2024 compared to the second half of 2023. According to a report by tech industry body Nasscom, this growth is a significant indicator of the country's potential in the AI sector. However, the report also noted a nearly 50% decline in funding rounds during the same period.

Despite this decline, the investments in Gen AI startups in the US saw an increase by three times, while investments done by big tech companies in Gen AI startups also saw a 1.25x increase. This trend suggests that the global technology industry is increasingly betting on the potential of generative AI.

Top global hyperscalers are expanding their infrastructure investments across geographies, with over $80 billion in commitments announced towards data centre and cloud capacity over the next 10-15 years. This infrastructure growth will be crucial in supporting the development and deployment of generative AI technologies.

Revenue from Gen AI is also gradually appearing as top IT companies are now prepared with strong use cases. Accenture, for instance, announced $2 billion in Gen AI revenue booked during the first half of 2024. India's largest software exporter, TCS, also reported $900 million in Gen AI revenue booked during this period, with 10% in production to be billed within FY 2025.

Sangeeta Gupta, chief strategy officer, Nasscom, emphasized the significance of generative AI in the tech industry, stating that it is revolutionizing the tech landscape and guiding clients through their entire Gen AI journey. The industry has seen a sevenfold increase in Gen AI activities, including business prospecting, talent development, partnerships, and new product launches, solidifying Gen AI as a top strategic priority for tech services companies.

Key insights from the report include 

  Startups  Gen AI saw a lagged effect of the 'funding winter', with a decline seen in H12024. By contrast, overall tech startup funding rose globally and in India.

  All Gen AI investments in India in H12024 were in the early stages — deals within $50 million. Globally, marquee investments were in late/growth stages — in the US, 2/3rd of H12024 investment deals were over $150 million.

  This year, greater investor funding went towards enterprise Gen AI platforms, relatively less towards application-based ones, unlike H12023. In the US, over 50% funding went to foundation model startups.

  Matrix Partners India emerged a key investor across multiple funding rounds.

In the Indian tech industry, Gen AI activity rose 7x since H1 2023 across business prospecting, talent development, partnerships, new product launches. 2024 saw a transition to product launches after strategic partnerships forged in 2023, with revenue in sight. The focus is on building and platformisation of cross-sectoral and vertical Gen AI use cases.

Enterprises turned to consultative business prospecting for guidance on use case selection, PoCs, decision-making around production, data privacy, and security challenges. One million employees have been trained on Gen AI since H1 2023, with 3,50,000 in H12024.

Nasscom is India's premier trade association and the chamber of commerce for the IT-BPM industries. It is a not-for-profit organization focused on promoting and developing the IT-BPM sector in India.

 Accenture is a global professional services company that provides strategy, consulting, digital, technology, and operations services. TCS is India's largest software exporter and a leading global IT services, consulting, and business solutions organization.

FAQS:

Q: What is the growth rate of investments in India's generative AI startups in the first half of 2024?

A: The investments in India's generative AI startups saw a two-fold increase in the first half of 2024 compared to the second half of 2023.

Q: How much did Accenture report in Gen AI revenue booked during the first half of 2024?

A: Accenture reported $2 billion in Gen AI revenue booked during the first half of 2024.

Q: What is the total commitment announced by top global hyperscalers towards data centre and cloud capacity?

A: Top global hyperscalers have announced over $80 billion in commitments towards data centre and cloud capacity over the next 10-15 years.

Q: How many employees have been trained on Gen AI since H1 2023?

A: One million employees have been trained on Gen AI since H1 2023, with 3,50,000 in H12024.

Q: What is the focus of enterprises in the Indian tech industry regarding Gen AI?

A: The focus of enterprises in the Indian tech industry is on building and platformisation of cross-sectoral and vertical Gen AI use cases.

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