India’s well-heeled get their AI kicks from secondary market

India’s affluent are chasing the world’s hottest trade — artificial intelligence. The appetite for jumping on to the AI bandwagon is so strong that they are venturing beyond Wall Street into the unlisted space.

From OpenAI to Anthropic, the rich and their investment offices are scooping up shares of unlisted technology giants through global secondary marketplaces, riding what is currently the most bullish wave in the world.

“Over the last 12-18 months, we’ve seen HNIs (high net worth individuals), family offices and, now, even institutions leaning into these opportunities, especially in AI and space tech,” said Viram Shah, founder and chief executive of Vested Finance, which pools investor money into feeder funds to participate in such deals.


Platforms such as Forge Global and Nasdaq Private Markets (NPM) have become key gateways to buy and sell these unlisted shares. NPM, which hosts shares of about 15,000 private firms, reported $60 billion in trading volumes. Forge’s Private Market Index — a benchmark for late-stage, venture-backed companies — has climbed 67.9% year-to-date.

Globally, the private secondary market has ballooned into a $100-billion segment.

NPM didn’t respond to queries. Forge declined to comment.

Unlike public exchanges with continuous price discovery, these platforms facilitate over-the-counter deals where employees, early investors or venture funds sell to accredited investors. “Private share transactions are negotiated on a deal-by-deal basis, often with limited volumes and longer settlement cycles,” said Pranab Uniyal, head of investment advisory HDFC Tru.

The appeal is obvious — investors want a slice of these companies during the steepest value-creation period. OpenAI’s valuation has surged from $80 billion to nearly $500 billion within a year, while SpaceX has jumped from $210 billion to $350 billion, Shah said.

As of Monday, OpenAI shares were trading at $723.12 on Forge, Anthropic at $162.15 and Databricks at $180 apiece.

The stupendous surge of the so-called Magnificent Seven stocks — Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla, flag bearers of technological evolution in the past decade — is still fresh in investor memory.

Investing modes

There are various routes to bet on these foreign unlisted shares. Direct participation by Indian investors, though constrained by regulations, remains popular.

Under the Liberalised Remittance Scheme (LRS), residents can invest up to $250,000 a year overseas for permitted purposes such as buying overseas shares.

Minimum investment requirements often exceed $100,000, said Ankit Jain, partner at Ved Jain and Associates. “These shares are available only to accredited investors — those who meet certain net worth or income thresholds,” he said. Once qualified, investors must remit funds under LRS. A 20% tax collected at source applies to such transactions, he added.

But transfers can be complicated.

“Most companies mandate that share transfers be approved by the board first, while others exercise a right of first refusal, allowing the company to purchase shares that may be offered to a third party,” said Pallav Pradyumn Narang, partner, CNK.

Some investors use special purpose vehicles (SPVs) to pool money and make these bets. In these structures, the SPV holds the shares until exit, after which proceeds are distributed in proportion to each investor’s stake. Minimum commitments are usually $50,000, and individuals may need to show net worth of $1 million or annual income above $300,000, said Narang.

For those unwilling to set up offshore structures, indirect routes are also emerging. Feeder funds, overseas alternative investment funds (AIFs) and vehicles registered in GIFT City offer exposure to global private companies. Some exchange-traded funds and fund-of-funds, such as Mirae Asset’s Global X Artificial Intelligence Fund, also provide a way in.

Risks

Investors must, however, be cognizant of the risks. “Private market shares are inherently illiquid, with no ready secondary market and long holding periods that can stretch for years,” Uniyal said.

These deals sit in a regulatory grey zone if not structured correctly. Routing investments through regulated vehicles would be critical to avoiding compliance and tax complications.

“Investors must carefully weigh transfer restrictions, lock-ins, and tax implications,” said Uniyal of HDFC Tru. “The prudent route is via regulated structures in line with the Reserve Bank of India’s LRS, the Foreign Exchange Management Act (Fema) and the Securities and Exchange Board of India’s AIF framework.”