India’s enthusiasm for AI is evident. From the government to enterprises and academia, everyone is eager to showcase their vision for AI adoption. Yet, despite all the buzz and optimism, investors remain cautious, and funding remains a concern.

A recent survey of more than 80 institutional investors conducted by Inc42 revealed that while 41% of Indian investors are allocating 20–40% of their portfolios to AI, only 7% are making it a core investment focus. Coincidentally, the share of investors with the least exposure to AI investments is also 7%.

The survey further revealed that for 27% of investors, AI comprised a mere 5–20% of their total funding, and 6% of the investors still don’t have any stake in AI companies.

At a time when India is urging the development of open-source systems and the creation of “quality data centres” free from biases, why is there a dearth of trust among investors? Before we ponder, let’s take a quick look at India’s AI funding scenario.

AI Deals Rise, But Funding Still Lags

Total AI investments in the country jumped 69% between 2022 and 2024. In 2023, new investments to the tune of $210 Mn were lapped up. This number increased to $245 Mn by last year.

Until Q3 of 2025, more than $260 Mn has already been infused in native AI startups. Deal counts have also increased over the years.

While there is growth in funding, AI is still among the least funded sectors in India. For context: AI startups could raise a mere $120 Mn in Q3 2025. In comparison, ecommerce, healthtech and enterprise Tech, the most........

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