AI Investment Shift: Focus Moves from Infrastructure to Application Layer in India
India's artificial intelligence (AI) investment landscape has undergone a notable transformation in the past two years. According to Hemant Mohapatra, partner at Lightspeed India, venture capital (VC) funding has shifted away from infrastructure and foundational models, now focusing more on application-layer AI innovation. As of now, application-focused AI startups represent more than 50% of the enterprise deal flow, nearly three times the share of infrastructure-focused AI companies, which account for around 17.5%.
Application-Focused AI Driving Innovation and Investment
This shift is significant, as it coincides with India's push to develop its sovereign AI foundational model. Mohapatra believes that the foundational layers of AI, including model training, compute infrastructure, and foundational architectures, are nearing commoditisation, making the application layer the primary area of focus for innovation. He draws parallels to past technological shifts, such as the dominance of TCP/IP or x86 chip architecture, where once a standard is established, the focus naturally moves upwards.
Also Read: Application-layer AI funding now 3X bigger than infra AI in India, says Lightspeed’s Hemant Mohapatra
India's Strength in AI Applications: A Strategic Advantage
India’s long history as an "application-heavy" economy, with decades of experience building applications for global companies, positions it uniquely to lead in application-layer AI. Mohapatra and other industry leaders, like Nandan Nilekani, advocate for India to focus on AI applications rather than competing with Silicon Valley giants in building foundational models. India's strength lies in creating scalable, real-world applications that address problems in sectors such as healthcare, logistics, and customer service, making it an ideal hub for innovation in AI-driven solutions.
