India's Unique Growth Path in AI Funding

India's AI funding primarily targets application-layer companies, in stark contrast to the US focus on infrastructure. Avendus Capital's report outlines India's distinct AI ecosystem, which is still emerging but has already created substantial value. The entire AI stack—from applications to infrastructure—presents diverse opportunities for growth.

Avendus Capital's August 2026 report reveals a striking contrast between AI funding trends in India and the United States. While almost 90 percent of AI investment in India targets application-layer companies, the US directs about 85 percent towards infrastructure and foundational models.

The report highlights India's distinct growth path in AI, driven by converging factors such as capital, talent, and a mature digital infrastructure. India's AI ecosystem is projected to evolve across different stack layers, including applications, middleware, models, and infrastructure, creating diverse opportunities for growth.

With more than USD 9 billion already generated in value, India's burgeoning AI sector is exploring numerous verticals, including vertical AI, consumer AI products, and back-office automation. The development of each AI stack layer will be crucial for assessing future value creation and understanding where India's competitive advantages may lie.