India: The First Country Fully Shorted by AI?

Moreover, every enterprise-level AI product launch from Silicon Valley triggers a notable decline in Indian IT stocks. According to M&G Investments, roughly two-thirds of the capital that flowed out of India over the past 12–18 months was directly tied to AI-themed portfolio adjustments. Global capital is rapidly shifting from the 'demographic dividend narrative' to the 'computing infrastructure narrative'—reallocating funds previously invested in people toward machines. This has become the market’s consensus choice. That said, while AI is causing unemployment for hundreds of thousands in India and disrupting domestic industries, it has also attracted approximately USD 70 billion in AI investment. The West will not truly abandon India; rather, it seeks new ways to secure more favorable pricing leverage. II. Why India Missed the AI Race While its old jobs are being destroyed, India has failed to smoothly capture the new dividends of the AI era! U.S.-based asset manager Altimeter estimates that global AI net profit will reach USD 637 billion by 2026—of which the U.S. captures 49% and South Korea 35%, together accounting for 84%. India is virtually absent from this core distribution list. As of mid-2026, India officially recognizes only three AI unicorns, with a combined valuation under USD 4 billion—far short of the scale required to compete globally in AI. Ultimately, Modi’s 'Make in India' initiative has yet to be fully realized. Consequently, India’s lack of industrialization has left its AI infrastructure capabilities nearly nonexistent. Economically, India has never functioned as a unified market entity. Unlike East Asian nations—which followed a progressive upgrade path of 'manufacturing → consumer electronics → internet → high-tech'—India skipped large-scale industrialization altogether and jumped straight into the IT services sector. This model, requiring minimal infrastructure investment, delivered rapid returns during globalization’s peak—but also caused India to miss out on foundational hardware pillars of the AI industry: semiconductors, servers, data centers, and power infrastructure. Today’s AI competition is fundamentally about computing power, chips, and infrastructure. With virtually no industrial accumulation in these areas, India naturally struggles to ascend the value chain. Secondly, although India boasts abundant technical talent, building a robust tech industry requires a virtuous cycle of 'domestic large market → economies of scale → product iteration → global expansion.' In plain terms: you need many people who can afford to spend money. Yet India’s per capita GDP stands at only around USD 2,800; wealth is highly concentrated; and approximately 228 million people live below the poverty line. Domestic enterprises remain poorly digitized and extremely price-sensitive toward software. Aside from a few government-backed giants, India finds it exceedingly difficult to nurture world-class platform companies or large-model firms. Hence, though India hosts nearly 20,000 SaaS companies—accounting for one-fifth of the global total—it has virtually no billion-dollar giants. Frankly speaking, most are service providers—not players directly engaged in market validation! Finally, India’s 'Big Six' outsourcing firms once commanded a combined market capitalization exceeding USD 500 billion. Yet in FY2026, even Tata Consultancy Services—the firm investing most heavily in R&D—allocated only 1% of revenue to research; Infosys and Wipro each spent just 0.5%. These figures pale beside Microsoft’s 12%, Google’s 14%, and Meta’s 25%.

India Is Being Fully 'Shorted' by AI

In practice, all six of India’s major IT outsourcing firms have announced large-scale layoff plans for FY2026. (Infosys estimates AI could displace 92 million jobs—including roles like front-end development and software testing; TCS forecasts a workforce reduction of over 23,000 employees.) In February 2026, India’s Nifty IT Index plunged over 21% in a single month—the worst monthly performance since the 2008 financial crisis. 'Because of AI, we no longer need so many people.' 'The slowdown in hiring is the elephant in the room.' 'I helped build this AI system myself—and now it has replaced my job.' Such statements appeared in reports quoting Srikanth Velamakanni, CEO of Nasscom (the National Association of Software and Services Companies). In the first half of 2026 alone, foreign capital withdrawals from Indian equities exceeded USD 23 billion. Against this backdrop, India’s top three outsourcing firms—Infosys, Cognizant, and Wipro—suffered panic-driven sell-offs, with their share prices nearly halved. Meanwhile, a report from Jefferies notes that the nature of collaboration between clients and software firms may shift—from traditional services like 'bug fixing' and 'software maintenance' toward higher-value offerings such as 'strategic consulting.' Consequently, Application Management Services—which currently account for 22%–45% of outsourcing revenue—may face drastic contraction. This not only implies a probable slowdown in India’s IT industry revenue growth but also signals the potential shattering of outsourcing’s long-held image in India as a 'stable' and 'respectable' career path. What does it feel like to distill yourself? Frankly, Indian programmers and customer-service agents are not the only groups facing AI-driven disruption. In April, an internet rumor surfaced titled 'Indian Workers Distilling Themselves.' Keyword searches reveal such work has already been widely deployed across India. Garment workers record their sewing workflows; shoemakers document how to lace shoes; warehouse staff film themselves packing items, applying labels, or scanning barcodes... Take plastic recycling operations in West Delhi: workers sorting and pre-processing scrap earn roughly INR 20,000 per month. By wearing a camera and diligently recording their work processes, each worker earns an additional INR 150 per hour. For locals, this qualifies as 'unexpected windfall income.' As for what these videos are used for: a startup named Build AI has already supplied filming equipment to 14,000 employees across dozens of factories—and accumulated over one million hours of first-person workplace video footage. AI and robotics labs are willing to pay over USD 7 per hour for such raw footage. If the content features household tasks inside American homes—such as tidying rooms or washing dishes—the price climbs even higher. As technology advances, humanoid robots capable of interacting with the physical world have become strategic priorities for companies like Tesla and Figure AI.

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