Institutional investors control an enormous amount of wealth, giving them the financial resources to shape industries through their allocation choices. Domestic institutional investors (DII) hold nearly ₹70 lakh crores (over $800 billion) in equity as of early 2025. Globally, pension funds and public institutional investors manage about $70 trillion in assets worldwide.
Historically, these institutions have invested in stable, predictable and scalable sectors like real estate, government bonds, infrastructure and public equities. In technology, funds flowed mainly to established companies in IT services, software and consumer electronics.
Only recently has manufacturing, especially hardware and semiconductor fabs, seen a rise in the last few years, with AI pulling institutional investors deeper than ever before. India’s push to grab 10% of the global semiconductor market by 2030 has also opened the doors to investment in tech manufacturing.
As a result, institutions are backing a wider mix of companies than ever before. Here’s how investment patterns are evolving today.
Rising interest in deep-tech manufacturing
Deep-tech startups in India alone raised $1.06 billion across 137 equity rounds as of July 2025. This is double the investment raised in the same period the year before. And this includes early-stage manufacturers too, working on semiconductors, space tech, defence hardware, and industrial automation.
The reason institutions are investing in this sector is simple. These startups are building foundational technologies which will offer long-term value creation. They will also put India on the map of technological competence. Crucially, VC funds run by ex-engineers are also entering this space, ensuring skill is passed on and developed immediately. It also encourages investor participation, knowing that the right people are involved.
AI is an investment magnet
Investors have sharpened their focus on manufacturing companies using AI, automation and technology in their processes. That’s because investors themselves are using these technologies to gain more than tenfold value across investment performance, ops efficiency, and risk management.
They’ve realised that manufacturers who use these technologies will build smarter factories, automate functions, eliminate redundancies and will be more resilient and future-proof. These capabilities have made it more attractive to both domestic institutions and long-term foreign investors tracking FII data.
Semiconductors remain the core focus area
Semiconductors are fundamental to the AI, automotive, consumer electronics and cloud infrastructure industries. As demand for AI and automation increases, so will the demand for semiconductors. The world witnessed early this year how disruptions to the semiconductor supply chain could grind multiple industries to a halt. It has become a strategically important sector, making it a priority for long-term institutional investors.
Allied industries also stand to benefit from the increased focus on semiconductors, as the world looks to regionalise semiconductor production and the supply chain.
Shift towards emerging manufacturing hubs
Institutional capital is moving towards emerging markets with improving deep-tech and manufacturing ecosystems. To that end, India has positioned itself as a favoured destination backed by its storied engineering talent and world-class expertise in chip design and R&D.
Other Southeast Asian nations, such as Vietnam and Malaysia, are also emerging as global supply chain hubs for electronics and component manufacturing.
Supporting both early-stage and mature manufacturers
Institutional investors have largely favoured mature firms like Tata Technologies share price as they offered stable, predictable returns. But with AI-backed risk assessment tools at their disposal, investors are willing to back early-stage deep-tech companies as well. This mixed portfolio strategy of investing in established firms and up-and-coming manufacturers is a welcome departure from tradition.
India as a manufacturing destination
The government is rolling out the red carpet for investment in semiconductor and IT hardware by offering up to 50% fiscal support for projects. There are already 10 approved semiconductor fab and ATMP/OSAT projects currently at various stages of development.
Final thoughts
Institutional investor patterns are now shifting from legacy heavyweights in stable sectors to deep-tech manufacturers. Investors are looking to regionalise manufacturing and supply chains to create long-term value and be more resilient to disruptions.
(DISCLAIMER: The information in this article does not necessarily reflect the views of The Global Hues. We make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information in this article.)
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