Foreign Direct Investment in the Age of Artificial Intelligence: New Trends and Challenges at the Global Level

Abstract

Currently, the global foreign direct investment (FDI) environment is in a state of significant flux due to volatile regional trends and rapidly changing technology with AI, dynamic policy environments and persistent geopolitical uncertainty. Although the initial figures of 2025 show a slight recovery in the sums of FDI inflows as compared to the years before, this increase obscures significant discrepancies on the surface level (Han, Zhang, & Ru, 2025). On the one hand, such countries as the United States and India are stabilizing their status as leading FDI destinations (Pan, Chen, Ting, & Xia, 2022). They are attractive since they have business-friendly reforms, strong regulatory environments and extensive consumer markets. Greater deal-making in the form of merger and acquisition (M&A) signals strategic corporate growth and confidence in the financial markets in such areas (Singh, Poonam Gupta, & Riyazuddin, 2026).Conversely, the recovery is uneven around the world. Greenfield investment, which is vital for new capacity, infrastructural development, and employment generation, has been characteristically low particularly in most of the developing and least-developed economies. Cross-border infrastructure financing and sustainable development via international project finance remain slack despite the global economic headwinds and risk aversion among the potential financiers. This has also created apprehension regarding the growing lapses both in terms of investment and development among developed and emerging economies.An additional dimension of complexity has been created by increased levels of scrutiny and regulation of investment screening. To protect national security, supply chains, and innovative technologies, many countries have increased scrutiny of FDI (Grigoriadi, 2025). The rise of such measures along with persistent trade tensions and a rise in global borrowing costs have escalated the levels of uncertainties surrounding multinational enterprises (MNEs) that attempt to go global. Businesses are thus confronted with a twofold challenge: to capture available business across new growth areas and to operate in a steadily more complex business and regulatory environment.It is against this backdrop that the chapter examines the emerging forces driving FDI driven mainly by technological innovation, changes in various sectors and government regulations among other factors and key headwinds hindering cross-border expansion. It looks at the roles of stakeholders, operational issues, economic and social implications of these modern trends. Finally, it includes practical recommendations that call on policymakers and business and industry leaders to put resilience, innovation and sustainable approaches first to liberate the potential of FDI in a rapidly changing world (Singh D. , 2023, p. 100).