The next phase of AI will not be won by countries that adopt it the fastest, according to Harshul Asnani, president and head of Europe business at Tech Mahindra.

He makes a case for the next era of AI sovereignty being shaped by those that bring together the infrastructure, talent, standards and trusted ecosystems that the technology depends on. His comments come after the UK government pledged £500 million (US$665.1 million) for a Sovereign AI Fund to support domestic AI startups and infrastructure.

“AI sovereignty is no longer an abstract policy debate,” he explained. “As AI reshapes economic competitiveness, national security, scientific research and public services, the real question is not simply how fast organisations can adopt AI.

“It is who controls the compute, talent, governance and innovation ecosystems that will determine where long-term value is created.”

What the UK’s £500m AI Fund actually buys

The UK’s Sovereign AI Fund was formed as part of the country’s bigger plans to position the UK as a leader in the global AI race, with the funding to provide capital and supercomputing access.

Asnani told us that, although the sum looks modest in comparison to other AI leaders around the world, its purpose is to unlock capabilities that private capital cannot provide. In addition to compute access, it can offer regulatory support, public procurement, safety assurance and the credibility of state backing.

“The cheque size is only part of the story,” he said. “The more material asset is the state capability attached to it. It is £500 million combined with the convening power of the British state: national GPU access through AIRR, regulatory fast lanes, government procurement access and a sovereign safety and assurance ecosystem that companies can draw on as they scale.”

He added: “The fund’s real test is whether the UK can move with venture speed against bureaucratic friction while building enough sovereign capability to avoid becoming dependent on foreign models, compute, standards and platforms.”

The UK’s AI ecosystem currently faces the challenge of access to high-performance infrastructure. Asnani explained that AIRR addresses this bottleneck by providing selected companies with national GPU capacity that’s difficult to secure commercially.

“For frontier AI startups, assured compute can be as important as funding,” he added.

Market access is another strength afforded by the fund, particularly as the UK is a billion-pound buyer of services.

“If government acts as an early customer in areas such as health, scientific discovery, cyber, transport, energy and public services, it can validate emerging AI capabilities, reduce adoption risk and create reference use cases that private-sector buyers can trust,” Asnani suggested. “This is not an advantage a private VC can offer through capital alone.”

Private capital can often come after a state identifies frontier areas it’s prepared to support, he added. This matters to countries like the UK, which can face funding gaps.

“A targeted £500 million will not match the balance sheets of the US or China, but it can influence the early-stage pipeline if it attracts private investment into the right companies and technologies,” he explained. “The fund is a calculated bet that Britain’s research base, entrepreneurial depth and institutional credibility can still translate into global relevance in AI.”

Correcting market failures

The Sovereign AI Fund is described by Asnani as an “intervention” in areas where private capital hasn’t been willing or able to move at sufficient scale. The government has intervened during a time when AI has surged in national importance, alongside greater desires for digital sovereignty across Europe.

“The market failures are clear: underinvestment in deep tech with long R&D cycles, limited domestic compute, the pull of US laboratories and a venture market that often favours scalable SaaS models over frontier science,” he explained.

He reflected on some of the risks that could come with the fund, mainly dangers concerned with bureaucracy.

“Government procurement cycles can be slow,” he explained. “Public-sector risk aversion can constrain innovation; political cycles can interrupt long-term strategy. State-backed entities may also find it harder to attract the same calibre of talent as private labs and venture-backed companies.”

The design of the fund is therefore important, he explained, as a serious risk is that the UK becomes an “AI client state dependent on foreign models, foreign compute, foreign safety standards and foreign platforms for the next wave of economic value creation.”

He added: “If the UK fails to act, the likely direction is clear: frontier models developed elsewhere, compute concentrated elsewhere, safety standards written elsewhere, and a disproportionate share of economic value captured elsewhere. Sovereignty in this context does not mean isolation. It means retaining sufficient capability to collaborate from a position of strength rather than dependence.”

The £500 million is designed to ensure the UK remains a credible participant in shaping AI, rather than outpacing the US or China, with Asnani explaining that it would enable the country to build, govern and benefit from the technology rather than merely importing the work of others.

“For enterprises, the lesson is equally clear. AI adoption alone will not create durable advantage. Long-term value will come from embedding AI with clear business purpose, robust governance, resilient infrastructure, cybersecurity, responsible innovation and sustained investment in people,” he added. “Organisations that achieve this balance will not only scale AI more effectively; they will help shape the more resilient and competitive AI economy now emerging.”

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