Time for IT giants to back India’s AI dream

India’s foundational AI startup, Sarvam AI, is reportedly in early talks to raise around $300 million from chip giant Nvidia, private equity firm Accel, and IT services major HCLTech. If the deal goes through, Sarvam AI could become the first foundational model AI startup in India to achieve unicorn status, with a valuation of about $1.2 billion.

While fundraising by AI startups is not new in India, Sarvam AI’s potential round has generated significant excitement in tech circles. For one, it is among the few startups in India to have developed an indigenous foundational model—an area currently dominated by the US and China. In that context, strong investor interest is a positive signal for the Indian startup ecosystem.

Currently, India relies heavily on American-developed foundational models from companies like OpenAI, Anthropic, Google, and xAI, despite being one of the largest users of generative AI tools. Such dependence weakens India’s strategic position in a global landscape where technology leadership is increasingly transactional and competitive. In that sense, wider adoption of Sarvam AI within India would be a positive development for the country.

Another significant aspect of this funding round—if it materialises—is the participation of HCLTech. This could make it one of the first major Indian IT services firms to invest in a domestic AI startup operating in the large language model (LLM) space. While Nvidia and Accel are natural investors given their domain focus, HCLTech’s involvement could mark a watershed moment for the Indian IT services industry.

Indian IT firms have built a strong global reputation through their technology expertise, execution capabilities, and talent pool. However, their track record in making bold bets, particularly in building or backing software product companies, has been mixed. Historically, they have been cautious about investing in disruptive technologies. While some software products have emerged from their ecosystems, they remain limited in number.

This narrative could begin to shift if HCLTech proceeds with its investment. The company already has a credible software product business and has previously acquired intellectual property from IBM, demonstrating its understanding of the product landscape. It could potentially leverage Sarvam AI’s enterprise solutions across its client base.

Ideally, other Indian IT services companies would follow suit in the coming quarters. India needs to innovate in the AI space not only for the country but for the world. Given the rising importance of AI in all sectors of the economy, domestic IT firms can definitely take the lead. They have the cash reserve, and the technology talent to do inhouse innovation. More importantly, investors are also now keen that IT firms invest in promising AI startups, which can then be leveraged in client servicing. If this happens, then no longer a market sell off will happen in IT stocks when players like Anthropic release new plugins.

It is time for Indian IT firms to move beyond a pure services mindset and embrace a product-led approach that complements their offerings. Investing in domestic AI startups could create a win-win scenari, strengthening both the startup ecosystem and the IT services industry.