India may benefit in the short term from a renewed US push to ease restrictions on artificial intelligence exports, but the shift could deepen its long-term reliance on American chipmakers and AI technology providers, analysts say.
Quick gains, lasting dependencies
The Trump administration released its AI Action Plan on July 23, 2025, following Executive Order 14179 issued in January 2025. The order directed officials to draft a strategy to strengthen US leadership in artificial intelligence and reduce regulatory barriers.
"In the short-term three to five-year period, Trump's AI Action Plan supports the AI infrastructure and AI-for-everyone growth across Asia, including India, with easy access supported by deregulation," said Dr. Danish Faruqui, CEO of Fab Economics, a US-based boutique semiconductor fab/OSAT greenfield projects advisory and datacenter investment advisory firm.
However, he warned that India and other Asian nations could return to pre-2020 levels of reliance on US-based companies for critical AI infrastructure.
"In the longer term 7 to 10 years effect, it dampens the urgency for developing domestic solutions for AI chip design, architectures, semiconductors, connectivity solutions, LLM and other components across the AI value chain, as all Asian nations like in the pre-2020 era would now after five years again be reliant on US headquartered AI players for AI infrastructure needs that serve as AI led growth vision for every nation," he said.
US chip exports set to resume
The AI Action Plan marks a reversal in US policy, lifting restrictions on AI semiconductor exports that were imposed through executive orders during the Biden administration.
"Key US-headquartered players like AI hardware companies Nvidia, AMD, Intel, Micron, and Seagate are now cleared to ship to Asian countries the previously sanctioned products, such as AI chip products across compute, networking, memory, and storage components of datacenter infrastructure, including Nvidia H20, AMD MI 308, Intel Gaudi, and Micron's HBM3E," Faruqui said.
According to Fab Economics' proprietary modeling, this change could drive major growth in AI datacenter infrastructure across the region.
"The Asian datacenter business growth from 2025 to 2029 holds potential for over US$1.2 trillion of AI chip consumption across compute, networking, memory, and storage, driven by over 30 GW of AI infrastructure projects, including announced, ground-breaking, and speculative projects based on policy announcements. This growth is mostly captured by US-headquartered AI players, culminating in over US$345 billion in cumulative annual revenue growth for US players," he said.
India's trillion-dollar crossroads
India has laid out a US$10 trillion economic vision centered around AI-led growth. But that goal depends heavily on scaling up AI infrastructure, most of which still relies on imports from US firms.
"India's US$10 trillion economic vision is predicated on AI-led growth, which in turn relies on domestic AI hardware infrastructure scale-up to drive AI use cases across public, enterprise, and individual levels," Faruqui said. "AI hardware infrastructure supply currently needs to be imported in India, which is mostly produced by US-headquartered AI value chain players across compute, networking, memory, connectivity, and storage datacenter infrastructure components like Nvidia, AMD, Intel, Micron, and Seagate."
To avoid over-reliance, Fab Economics advises India to rethink its AI infrastructure investment policy and simultaneously pursue domestic capability building.
"Specifically for India, this is a seize-it-all moment, as it competes for AI infrastructure, domestic and FDI-based projects with other Asian countries," he said.
"India must recalibrate and develop an AI datacenter investment policy amidst recent changes, one that is attractive globally and meets all success factors required for AI infrastructure site selection and setup," Faruqui added.
"In parallel, India must focus on aggressive development of domestic AI hardware and software stack components by garnering support from both US and non-US partners, though treading carefully to balance geopolitical guardrails on AI technology to ensure sustained access."
The balancing act ahead
India's AI strategy now stands at a pivotal juncture. While deregulation under Trump's AI Action Plan opens the door to faster infrastructure growth through access to high-performance US chips, it also risks reinforcing external dependencies that could limit the country's ability to shape its own AI future.
The influx of foreign technology, though beneficial in the short term, may reduce the urgency for investing in homegrown semiconductor and AI stack development.
To mitigate this, policymakers must pursue a dual-track approach that involves welcoming foreign investment while also advancing domestic capabilities at speed. By recalibrating its AI datacenter policies and fostering partnerships with both US and non-US players, India can position itself as a competitive and self-reliant hub for AI innovation without compromising long-term resilience.
Article edited by Jerry Chen
