Indian artificial intelligence (AI) startups eyeing expansion into the United States are running into obstacles tied to immigration policy and regulatory red tape, as recent tightening of visa rules complicates their ability to set up operations.
“As a startup, we are already facing multiple challenges and this is yet another that we need to deal with now,” says LatentForce co-founder Aravind Jayendran, quoted by The Economic Times.
He further added, “there is a limit to how much we can do online. For example, we have met all our customers in person and then closed the deal. If you cannot do that, it makes you handicapped as you are not getting sales.”
Stricter visa policies are forcing startups such as Qodex to reconsider their hiring and growth plans in the U.S. Indian entrepreneurs can now only apply for visas from within India, eliminating previous workarounds through third countries and making it more difficult to meet investors or clients in person.
With potential cutbacks to programs that allow international graduates to remain and work in the U.S., many companies are restructuring their talent strategies just to stay competitive. Industry leaders warn these hurdles could slow innovation at a moment when the global race for AI leadership is accelerating.
READ: Young founders in their 20s raise $5 million for AI startup Human Behavior (
Mohan, another startup founder quoted in the report, noted that while his firm will keep hiring local talent in the U.S. for business development roles, it has pulled back on plans to recruit newly minted engineers where many of them Indian students graduating from American universities. Instead, the company is ramping up engineering hires at its India offices.
India’s AI startup scene has been expanding rapidly, with firms such as Composio, Smallest.ai, and Atomicwork moving their base to the U.S. to gain access to its deep capital pools and larger customer base. For many founders, proximity to the world’s leading AI research hubs and investors is critical, as it allows them to stay plugged into the latest breakthroughs while competing for funding on a global scale.
For years, Indian IT giants like Infosys, TCS, Wipro, and Cognizant have formed the backbone of America’s tech sector, supporting everything from enterprise software to cloud services and outsourcing. Indian nationals received more than 72% of H-1B visas in fiscal year 2023, a statistic that underscores just how reliant U.S. companies are on Indian talent.
Yet, with the U.S. moving to tighten visa rules, industry leaders warn that this established pipeline could face disruption. The concern is not only about entry-level engineers but also about the long-term leadership trajectory. After all, Indian American executives such as Sundar Pichai at Google, Satya Nadella at Microsoft, and Sanjay Mehrotra at Micron now head some of the country’s most influential firms. Policymakers are being urged to weigh immigration reform carefully, as restricting this talent flow could weaken America’s competitive edge in the global tech race.
The Trump administration’s tougher immigration stance is emerging as a major obstacle for Indian tech professionals and startups seeking opportunities in the U.S. At a recent AI Summit in Washington, D.C., President Trump called on American tech companies, including Google and Microsoft, to place greater emphasis on hiring U.S. workers rather than relying on foreign talent, a message seen as directly aimed at curbing recruitment from India. “Many of our largest tech companies have reaped the blessings of American freedom while… hiring workers in India,” Trump stated.
The stance reflects Trump’s broader “America First” agenda, reinforced through a series of executive orders designed to accelerate domestic AI development, push back against what he calls “woke” AI models, and limit dependence on overseas talent.
Visa hurdles are already becoming more pronounced. Denial rates for O-1 visas climbed from 4.5% in FY23 to 5.8% in FY24, with heightened scrutiny slowing down the approval process. On top of that, the possible rollback of the Optional Practical Training (OPT) program which currently lets F-1 student visa holders work in the U.S. for up to two years—poses a serious threat to the pipeline of Indian graduates moving into H-1B roles. Himanshu Tyagi, co-founder of Sentient Labs, underscored the dilemma, saying, quoted by MyStartupLife, “the only other option is to hire local talent, which is extremely expensive, and we cannot wait since time is of essence when it comes to AI.”
Beyond immigration, Trump’s economic agenda poses additional risks for India’s tech industry. Proposals such as new tariffs on IT services and higher taxes on remittances could undermine a sector valued at $254 billion, which already contributes an estimated $80 billion to the U.S. economy.
Since the U.S. remains India’s largest technology market, restrictions of this kind would directly affect outsourcing leaders like TCS and Infosys, whose workforces span both countries. Added pressure from the proposed 25% outsourcing tax under the HIRE Act and tighter rules on remote work could further weaken India’s export-driven IT model, while potentially pushing U.S. clients to explore alternatives in markets like Canada or Germany.
For Indian startups in particular, the stakes are even higher. Many young AI firms view the U.S. as their primary growth destination, both for its funding ecosystem and its role as the global hub of innovation. Any slowdown in access whether through stricter visas, tariffs, or outsourcing taxes could force founders to rethink expansion plans and look for friendlier markets. How the U.S. balances protectionist policies with its need for top global talent may ultimately shape not just U.S.–India tech ties, but the trajectory of the next wave of AI-driven startups.