OPINION | Tech trajectories of India and U.S. are intertwined. A rupture could leave China the victor in the AI battle

A disproportionate share of the world’s top AI researchers are of Chinese origin.

The U.S. administration has directed plenty of barbs at India in recent months lamenting the lack of closure on a bilateral trade deal and imposing punitive tariffs on exports from India. Yet, this political theatre misses the real structural challenge both economies now face: AI’s potential to upend the very foundation of prosperity that has bound the U.S. and India together for the past 25 years—technology employment.

Since the late 1990s, the U.S. and India have been the two poles of the global tech economy. The U.S. exported consumer technology and enterprise software, while India became the undisputed leader in technology services.

Employment in technology and related jobs in the U.S. increased from around 3 million in 2000 to more than 6 million by 2024, driven by the rise of internet and software companies. India’s growth trajectory has been even more stark. The IT-BPO workforce grew from 0.5 million in 2000 to a staggering 5.43 million by 2024, according to NASSCOM. Services exports surpassed $200 billion in 2024, highlighting that India had become the global back office and increasingly, the digital lab for the world.

Importantly, offshoring tech work to India did not impact U.S. tech employment in the way manufacturing offshoring to China decimated blue-collar jobs. The rise of Google, Amazon, Meta and others created entirely new categories of work in the U.S. That’s why H-1B visas, though politically charged, were less of an issue. Tech unemployment has averaged under 3% in the U.S. for over 2 decades, far lower than in other sectors.

The tech boom generated extraordinary wealth creation for both the U.S. and India. From 2004 to 2024, the S&P 500 delivered a CAGR of ~9.5%, driven primarily by technology giants whose combined market caps are now in the trillions. The NIFTY 50 compounded at ~11% in dollar terms, fueled by IT Services companies like Infosys and TCS. A startup ecosystem of 100+ tech unicorns has also generated significant wealth in the Indian private markets.

High-earning tech workers have driven powerful chain reactions in both the countries. Silicon Valley’s wealth has inflated real estate markets, with median home prices now breaching $1.5 million in the Bay Area. Similarly, India’s engineers have spurred 7%+ annual growth in private consumption, driving car ownership, housing boom, and strong overall retail demand. Bengaluru and Hyderabad have become economic powerhouses in just 2 decades.

However, AI is now rewriting the script. For last 3 decades, tech growth relied on operational expenditure: mass hiring of engineers, each costing $20,000–$50,000 in India or over $100,000 in the U.S. Today, costs are shifting sharply toward capital expenditure. Data center investments are projected to exceed $300 billion annually by 2026, as companies pour money into GPUs, chips, and other physical infrastructure.

Meanwhile, employee costs are concentrating at the top. Instead of hiring thousands of mid-level coders, firms are paying millions to a handful of AI researchers. The broad base of tech employment that once powered consumer demand may no longer grow at the same pace.

This shift also partially explains the renewed friction over H-1B visas in the U.S. Historically, foreign engineers did not displace U.S. workers because demand was insatiable. Today, with AI dampening net tech job creation, anti-H1B sentiment feels sharper, even though tech unemployment remains relatively low.

At the same time, remote work has accelerated in the post-Covid world. Meta has finally opened an engineering hub in India. Anthropic is hiring solution engineers outside the U.S. Companies are learning to tap global talent pools in real time, not just to save costs but to find scarce skills wherever they exist.

This transition also risks playing into China’s hands. A disproportionate share of the world’s top AI researchers are of Chinese origin, and companies like DeepSeek and Alibaba’s Qwen have already demonstrated the ability to operate at the cutting edge of AI. Unlike the U.S. giants that are tightly guarding their AI models, Chinese players are leaning toward open-sourcing large models, accelerating diffusion and driving price deflation. That dynamic could compress margins for American tech leaders while eroding the premium India has long enjoyed from its English-language services edge.

President Trump’s tariffs may bruise India’s traditional exports in the near term, but they are sideshows compared to AI’s impact on the tech employment model. For both the U.S. and India, the next 25 years will not be about scaling armies of engineers. It will be about massive capital investments and mastering how to leverage scarce AI talent.

For most of the 21st century, tech jobs were the flywheel of prosperity: increasing private consumption, creating wealth, and fueling stock markets. AI threatens to slow that flywheel. The danger is not that U.S. and Indian tech workers will compete against each other, but that they will both face a future where jobs are fewer, and machines do more of the work.

If Washington and New Delhi fail to cooperate, Beijing could walk away with the spoils.