National Interests Drive the New Tech Cold War

As we move through the second quarter of 2026, "Sovereign AI" has emerged as the dominant geopolitical theme. Governments are no longer content with relying on third-party cloud providers based in the US or China. The push for localized, physics-informed AI models designed to run on national infrastructure for critical sectors like energy and defense, is accelerating.

In India, foreign institutional investors (FIIs) have remained net buyers, pouring nearly $8 billion into the market this year, specifically targeting firms involved in national digital infrastructure. This trend reflects a global movement where AI is treated as a strategic utility, similar to the electrical grid. The focus is on hyper-specialization: models trained on local data, respecting local regulations, and ensuring data sovereignty in an increasingly fractured global internet.