India Produces Only 3% AI Infrastructure & Foundational Start-Ups, Says Report

Even as India increases its focus on artificial intelligence (AI), the country accounts for just 3 percent of early-stage AI infrastructure & foundational start-ups. AI application-focused startups in India are on the rise, capturing a significant 65 percent market share, as per the ‘Sense AI Annual Ventures 2025’ report by AI investment fund Sense AI Ventures. 

“India has a large pool of software developers with AI knowledge. Instead of building infrastructure, they rely on global providers like Google, Microsoft, and AWS, which offer free cloud access to startups in their early years,” said Rahul Agarwalla, founding partner, SenseAI Ventures.

AI tooling accounts for 22 percent of startups. The report is based on a sample size of 849 startups from across India, analyzed last year. Interestingly, Bengaluru emerged as the AI capital of India, securing over 40 percent of the total $1.35 billion funding AI startups received in 2024. Delhi NCR ranked second, followed by Mumbai in third place.

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Since the launch of ChatGPT in 2022 and the introduction of DeepSeek in 2025, the race for faster AI adoption and implementation has intensified. As a result, companies have been focusing heavily on AI investments. 

In 2024 alone, hyperscalers like Google, Amazon, and Meta invested $200 billion in AI infrastructure. This spending is expected to continue growing, as the risk of underinvestment is seen as greater than the risk of overinvestment, adds the report.

Further, companies focused on the development, deployment, and use of artificial intelligence technologies worldwide, such as OpenAI, Anthropic, and Midjourney, spent approximately $13.8 billion on AI in 2024. This marks a sixfold increase compared to 2023.

Drop in AI Cost 

One of the biggest innovations with regard to DeepSeek was the low cost at which it was built compared to other AI models. Chinese AI company DeepSeek was built at a cost of around $5.5 million as compared to OpenAI, which invested over $100 million to develop its large language model GPT-4. Thus, the cost of AI will be cheaper with time as technology becomes less expensive.

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“The number of startups attempting to build LLMs in India is growing, especially after DeepSeek's success. The recognition that building an LLM doesn’t require a billion dollars has fueled this. Instead, startups can do it with much less capital, like around $6 million. The number of companies in this space is expected to rise, potentially reaching 20, 30, or even 40 by the end of the year,” said Agarwalla.

As the world intensifies its focus on AI, it will be fascinating to witness the new developments emerging every day.