Artificial Intellegence Artificial intelligence India and China: AI technology on two different paths to dominance

China and India have been investing recently in the area of AI and have commonalities such as growing start-up ecosystems, abundant labour, vast data, and supportive regulatory regimes which could drive AI adoption. However, we see divergent paths for these two economies – with China likely to be a growing hub for software and robotics, while India could leverage its global services expertise to develop world-class automation platforms. We estimate upside for some companies due to their AI investments, which we believe are better understood by investors.

In a 2018 Q-Series report, UBS analysts noted that China has taken the lead in some fields of AI. This has been enabled by strong policy support, a better-funded start-up ecosystem relative to other Asian economies, and entry barriers for foreign companies. However, a high dependence on external tech, a lack of cross-disciplinary skills to apply AI for industry needs, market fragmentation, and lack of a robust professional services ecosystem could hinder B2B adoption, in our view.

India'‘s strength as a global IT services powerhouse is being leveraged by large providers to cross-sell native AI platforms. These platforms are still small, but are growing at a rapid clip. These companies are also helping global clients leverage third-party AI platforms. Global giants are leveraging the vast amounts of data generated by their Indian users to train AI algorithms. India remains a key source of talent with cross-disciplinary training and global exposure. Low R&D spending, small domestic markets and foreign competitors remain the key challenges.