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Sector analysis - Investing in the AI sector in India

Marisha Bhatt · 07 November 2023 · 0 Comments

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Sector-analysis---Investing-in-AI-sector-in-India

Unless you are living under a rock, you cannot miss the increasing use of AI in our daily lives. Be it the use of AI for stock trading, online health checkups, online education, etc. AI is set to be part of almost every field in the near future. Therefore, most seasoned investors consider this to be a ripe opportunity to invest in AI stocks and create a long-term investment portfolio. So check out this blog to know the top stocks belonging to the AI sector in India and a few key details of this sector as a whole. Read More: Best Defence Sector Stocks in India in 2023

Sector Overview of the AI Sector

AI barged into the imagination of science fiction many decades ago but the advancement of technology in this sector has helped make many of the science fiction a reality. Artificial Intelligence (AI) harnesses the capacity of machines to mimic human cognitive abilities, including thinking, perceiving, learning, problem-solving, and decision-making. This emulation is made possible through progress in data gathering, aggregation, analysis, and computational capabilities. AI stands as one of the most transformative innovations in human history, poised to profoundly shape our future. The global AI market, which approached $59.67 billion in 2021, is anticipated to surge at a remarkable 39.4% CAGR, reaching an impressive $422.37 billion by 2028. India's AI market is also on the rise, with a projected CAGR of 20.2%, surging from $3.1 billion in 2020 to an estimated $7.8 billion by 2025. Experts foresee a substantial 31.4% increase in jobs linked to data and mathematical sciences, predominantly driven by AI, by the year 2030.

Segments of AI in India

The AI sector in India can be broadly categorised under many segments on the basis of various factors like end use, solution or technology. In the technology segment, Deep Learning (DL) is the dominant technology, characterised by its use of artificial neural networks to replicate human decision-making and its efficiency in processing large datasets, making it popular for applications like image recognition, Natural Language Processing (NLP), and speech recognition. In the solution segment, software takes the lead, underlining its essential role in India's AI ecosystem. Finally, in terms of end-use, the advertising & media sector holds the highest share in the Indian AI market due to the widespread adoption of AI-powered technologies for personalised content creation, targeted advertising, sentiment analysis, and predictive analytics. These AI applications enable businesses to better understand customer behaviour and preferences, resulting in more effective and personalised advertising campaigns.

Highlights of AI Sector in India and collaborations

Unlocking GDP Potential

A NASSCOM report titled 'Unlock Value from Data and AI: the India Opportunity' indicates that an integrated data utilisation strategy could contribute up to $500 billion to India's GDP by 2025, which is nearly 10% of its $5 trillion economy target.

AI Skills Leadership

As of 2022, India leads globally in AI skills, as per data from LinkedIn, with the highest AI talent pool. It surpasses countries like the US, Germany, Israel, Canada, and the UK in this regard.

AI Global Ranking

India is ranked 6th on Stanford's Global AI Vibrancy ranking, excelling in the 'Inclusion' parameter. The country also secures the 8th spot in AI patent filing and ranks 4th in AI scholarly paper production.

Burgeoning AI Talent

India boasts a burgeoning AI talent pool with over 500,000 professionals employed in AI, Machine Learning (ML), and analytics fields, driven by the industry's growth.

Indo-German AI Initiative

India has collaborated with Germany to establish AI initiatives focused on healthcare and sustainability. Led by the Indo-German Science and Technology Centre (IGSTC), this partnership, involving the Department of Science & Technology (DST) and the Federal Ministry of Education and Research (BMBF), aims to advance AI-based startups and research while promoting AI applications in sustainability and healthcare.

Global Partnership on AI (GPAI)

India has joined the Global Partnership on Artificial Intelligence, a multi-stakeholder international project, along with other nations. It focuses on governing responsible AI development and use, based on principles like human rights, inclusiveness, diversity, creativity, and economic prosperity. India took over the Chair from France in 2022 and is committed to addressing challenges in healthcare, education, and the environment while emphasising fairness, accountability, transparency, inclusiveness, privacy, and security in AI systems to drive social impact.

Top AI stocks in India in terms of market capitalisation

Some of the top stocks in terms of market capitalization in the AI sector are mentioned below.

Bosch

Bosch Ltd, known for electronics and white-goods manufacturing, has strategically embraced AI technology. Since 2017, Bosch has been integrating AI across its operations, spanning engineering, production, supply chain management, and electric vehicles. Their ambitious aim is to incorporate AI into all their products and processes by 2025. BOSCH

The trailing returns of Bosch are, BOSCH.jpg-2.

Tata Elxsi

Founded in 1989, Tata Elxsi has evolved into a leading global provider of design and technology services, serving various industries like automotive, healthcare, and broadcasting. Part of the Tata Group and listed on the stock market, the company excels in AI applications, including self-driving cars and video analytics. Additionally, it explores IoT, cloud, and smart mobility. Tata Elxsi's achievements were recognized with the NASSCOM Engineering & Innovation Excellence Awards in 2021. Financially, the company has shown strong performance, with a 15% compounded sales growth over the last five years. TATA-ELXSI

The trailing returns of Tata Elxsi are, TATA-ELXSI.jpg-2

Persistent Systems

Established in 1993 and headquartered in Pune, Persistent Systems specialises in providing secure and scalable mobile networking solutions. They utilise advanced Wave Relay MANET technology for these purposes. The company leverages AI to assist businesses in enhancing and expanding their operations, prioritising cases, and designing platform architecture. Financially, Persistent Systems has also demonstrated strong performance, achieving a compounded sales growth of 15% over the past five years.

The trailing returns of Persistent Systems are,

Oracle Financial

Oracle provides prebuilt AI and data-driven cloud applications that enable companies to automate operations, resulting in cost savings and improved customer experiences. Their AI applications span various fields, from finance and sales to HR, streamlining tasks such as cash flow optimization, sales conversion, and employee engagement. These cloud applications enhance automation and reduce human errors, contributing to operational efficiency and customer satisfaction. ORACLE

The trailing returns of Oracle Financial are, ORACLE

Cyient

Established in 1991, Cyient is an engineering, outsourcing, and technology solutions firm headquartered in Hyderabad. They offer AI tools and support businesses in attaining their objectives. Cyient has been recognized as one of the world's top 30 outsourcing companies. Their financial performance showcases a compounded sales growth of 10%. Over the past two decades, the company has strategically expanded, making 11 acquisitions and 3 investments, contributing to its overall growth. CYIENT

The trailing returns of Cyient are,

Conclusion

AI is the future and it is advancing in various fields at a rapid pace. The extent and the scope of AI ensures that an investment in the AI sector can help in capital appreciation in the long run. However, this sector is quite dynamic and therefore, it is important for investors to analyse the core fundamentals of the company as well as the growth trajectory of the sector as a whole before making their investment decisions. This article was an attempt to explain the growing presence of AI and its role in shaping our economy as well as highlighting the top players in this segment in India. Let us know if you need further information on the same or details of any sector of the economy and we shall take it up in our coming blogs. Till then Happy Reading!

Marisha Bhatt

Marisha Bhatt is a financial content writer @TrueData.

She writes with the sole aim of simplifying complex financial concepts and jargon while attempting to clarify technical and fundamental analysis concepts of the stock markets. The ultimate goal is to spread vital knowledge and benefit the maximum audience. Her Chartered Accountant background acts as the knowledge base to help clarify crucial concepts and create a sound investment portfolio.

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Sector analysis - Investing in the AI sector in India

Sector Overview of the AI Sector

Segments of AI in India