India talks big on AI, but markets are walking away

India has opened a tech city in Gujarat aiming to increase jobs in tech over the next two decades, while at the same time, global investors continue to exit.

On Sunday, Union Home Minister Amit Shah inaugurated Ahmedabad’s Million Minds Tech City. The site currently covers almost 65 acres but is planned to grow to 400+ acres. The site worth $1,5 billion would create 70,000 plus jobs and attract global tech firms and other businesses to Ahmedabad.

During the inauguration, Shah hinted at Gujarat’s next steps. As of yet, the state has done well in manufacturing, pharma, ports and green energy, Amit said.

However, it now requires tech parks and centres to compete with Bengaluru, Hyderabad and Gurugram. He also added that young people need training in robotics, quantum computing, semiconductors, cybersecurity and space tech.

The first phase of the site covers about 1.3 million square feet, with $131 million already spent. GHL and CREDAI’s Shekhar Patel said that around 800,000 square feet has already been leased to companies like TCS, IBM, Valtech, DevX and APSER Life Science.

He said GIFT City would act as an anchor for the project and that Gujarat could become India’s top GCC hub within ten years.

Foreign money is heading to Taiwan and Korea

The sentiment in the markets is very different. India is close to dropping out of the world’s five biggest stock markets for the first time in three years.

Since September 2024, when its total market value touched a record $5.73 trillion, about $924 billion has been lost. The Nifty 50, which was once the best-performing major index in the world, is down more than 9% this year and is heading for its first annual loss in ten years.

The reason is AI, but not the kind India is celebrating. Investors are not looking for AI talent or services right now. They want chips. Taiwan has TSMC, which builds the world’s most advanced semiconductors.

South Korea has Samsung and SK Hynix, which make the memory chips that power AI data centres. Their stock markets are up 78% and 42% this year. The two countries are now less than $500 billion away from overtaking India in total market value.

India’s IT sector, on the other hand, is going the other way. It is a $315 billion industry built on outsourced work for Western companies. The Nifty IT index is down more than 26% this year, its lowest since 2023. The main reason is that AI has become very proficient at coding, and other routine work that Indian tech businesses initially revolved around. 

Foreign investors are leaving India, and fast

Foreign investors have taken out a net $42 billion from Indian markets since the start of 2025. Their stake in Indian stocks has fallen to a 14-year low, now below that of domestic investors for the first time in over 20 years, according to Goldman Sachs.

India’s share in the MSCI emerging markets index has dropped from 19% last year to about 12%.

“This isn’t a dip you buy,” said Gary Dugan, chief executive of Global CIO Office. “It’s a terminal value story. The assumptions about where these businesses are in 10 years have to change.”

India currently ranks on the 1st when it comes to AI skills, and has around 16% of the world’s AI talent. Unfortunately, talent is not enough to move markets the way chip factories do. There is no Indian company like TSMC that relies on the rise and fall in AI chip demand. India’s AI presence is scattered across services companies, unlisted startups, and a growing domestic market.

“While the world reprices around artificial intelligence, India’s headline indices remain anchored to the past,” said Aadil Ebrahim of Klay Group. Until Indian markets produce a new generation of tech builders, he said, India will remain on the sidelines of the global AI investment story.

The gap between the government’s promises and what markets are saying has rarely been this hard to ignore.

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