Trump’s Stargate, Biden’s chip orders spur fears, policy actions in India

On 14 January, former president Joe Biden signed an executive order segregating nations as friendly, neutral and hostile to protect US-designed chips that power global innovation in AI. India was ranked as a neutral, limiting the number of chips that can be bought by India from US-origin companies such as Nvidia.

And on 21 January, newly sworn-in president Donald J Trump Jr announced Stargate, a company that Trump said will build “the largest AI infrastructure project in history… to power the next generation of AI”. Oracle chairperson Larry Ellison, along with OpenAI and SoftBank chiefs Sam Altman and Masayoshi Son, were key stakeholders, committing $100-billion investments upfront—with pledges to scale it up to $500 billion. Their objective is to operate and distribute a network of computing infrastructure through America-wide data centres.

Impact on Indian tech companies

In India, concerns about access to AI tech reflected in the share slump of domestic new-age tech companies.

The ₹10,922-crore Netweb Technologies, which sells AI computing and managed cloud applications for clients in the US looking to develop their own AI solutions, closed ended at ₹1902.70 per share on Thursday—down 24% since Biden’s order. Its Delhi-based peer, E2E Networks, fell on 10 out of the past 11 days, and hit the lower circuit in the market on Thursday to close at ₹3488.05—down 11% since the announcement.

India’s limited AI budget and challenges

While India’s AI Mission has a similar goal like that of Trump’s Stargate, but its proposed budgetary outlay of $1.2 billion is minuscule in comparison to the US initiative.

Three senior consultants to the Centre’s Ministry of Electronics and Information Technology (Meity) told Mint that talks have commenced or renewed at various levels across the ministry, keeping the current threats and risks in mind.

“The government is aware that one of the biggest requirements for India right now are core patents and intellectual properties—in semiconductor cores with competitive performance and a foundational AI model to begin with. However, there is also a clear understanding that India cannot create an Nvidia or Microsoft-equivalent overnight, and incentives alone will not suffice,” one of the three officials cited above said, requesting anonymity.

“Talks are on regarding how to approach AI innovation comprehensively, and seek public partnerships if need be with regard to generating greater private-sector value of investing in domestic R&D,” the official said.

The key challenge, as the official highlighted, lies in the structure of innovation. The fundamental patents, licences and rights of the core architecture of chips inside an Nvidia processor, or the foundational AI models on which global AI development and applicational research is being done, largely belong with companies headquartered in the US. With Trump anticipated to take a hardline nationalist approach in his policies such as with Stargate, nations such as India have limited capability to build these technologies without licencing them first from America.

This gives the US unprecedented soft power as AI and chips emerge as two of the world’s most valuable commodities.

Strategic responses and opportunities

While it is “not necessary to panic or be in crisis now, there is need for India to prepare its own technologies too”, said Ashok Chandak, president of industry body India Electronics and Semiconductor Association (Iesa).

“By market cap, three-fourths of the global chip market cap belongs with the US—giving it clear leadership. A $500-billion move will further leverage this, by also bringing in a foreign investor,” Chandak said. “Instead of comparing this, a bigger trillion-dollar opportunity in the AI applications market means that there are greater open-market opportunities for the rest of the world to grow too. While there will be a competitive disadvantage due to the size and might of America, we can always find a differentiator and conduct our own innovation.”

Each of the officials cited above said there have been no immediate knee-jerk policy recommendations within the Centre, barring already-active talks of a second round of electronics component and semiconductor incentivization programmes. 

Mint reported on 12 December that the Centre’s upcoming $3-billion tech incentivization programme would include a tranche dedicated to boost private-sector participation in foundational R&D in India—in a bid to develop the very core technologies that are now potentially hurt by the US’s moves.

The officials cited above also expressed confidence that former president Biden’s order is likely to be rescinded or modified by Trump—mostly to India’s benefit.

“Future bilateral talks are likely to help India make a case for friendlier and more collaborative policies with the US. The two nations are a part of the ‘Quad’ (alongside Australia and Japan), and with Modi-Trump relations having been generally favourable, it is likely that India can leverage its human and data capital to strike a good deal with the US as far as chip access is concerned,” one of the officials said.

Call for innovation and collaboration

Still, industry stakeholders advised caution—but added that there are multiple silver linings to the current situation.

“This is a clear example of AI being weaponized, and we will likely see more of this in the near future unless we begin to develop our own core competencies,” said Ajai Chowdhry, co-founder of HCL and think tank Epic Foundation.

“The two successive decisions by the US have clearly showcased how vulnerable India is to the influence of America in global geopolitics even today,” Chowdhry said. “At the end of the day, there is no denying that as far as foundational technologies are concerned, India does not have resources to build anything without importing the core reference designs.”

According to him, even in the chip fab sanctioned out of India’s first round of semiconductor incentives, “we do not have core technologies”—and India would need global companies to come and use its capacity. “There is a clear need to invest exponentially more in design-linked incentives, so that chip design engineers can build products to cater to India’s own market.”

Kashyap Kompella, founder of AI consultancy firm RPA2AI Research, underlined the need for public-private collaborations. “Trade policies will undoubtedly leverage AI as a collateral going forward. While the government may not be able to incentivize it all, a key factor in tow could be to capitalize on India’s entrepreneurial stalwarts and the biggest conglomerates to become the funding pillars of India’s AI journey,” he said. “The biggest difference between the US and Indian markets are the funds available for conducting foundational research—and as a result, a paucity of research minds within the country. This needs to change.”

Kompella cited China’s success as a point of reference for India. “The development of the DeepSeek R1 reasoning model, done by China at a fraction of the cost of the US, is proof that frugal innovation is definitely achievable,” he said. “Adopting the right policies and strategies for the government to work with homegrown private firms will be key in this regard.”