Major technology companies are making substantial investments in India, focusing on the expansion of cloud computing and artificial intelligence infrastructure. Microsoft and Amazon have recently committed over $50 billion in combined investments within a 24-hour period.
Microsoft announced an investment of $17.5 billion over four years, intended for the development of large-scale data centers, integration of AI into government systems, and training programs for the tech workforce. Following this announcement, Amazon revealed its plan to invest more than $35 billion in new projects, adding to its existing $40 billion investment in the country. Intel also indicated its intention to manufacture computer chips in India, capitalizing on rising PC sales and the rapid adoption of AI technologies.
India's AI Strategy: Talent and Applications
India currently lacks a prominent indigenous AI model comparable to those in the United States and China, nor does it have a major homegrown AI infrastructure company. Instead, the country aims to leverage its extensive IT talent pool to develop and deploy AI applications for businesses, presenting a significant opportunity for American tech firms.
S. Krishnan, secretary at India’s Ministry of Electronics and Information Technology, emphasized that computing power and AI models alone are insufficient. He stated, "It requires companies making application layer and a large talent pool to deploy them."
India has already established a notable presence in the global AI landscape. Stanford University ranks the country among the top four nations for AI activity, alongside the United States, China, and the United Kingdom. Furthermore, India leads on GitHub, a platform for developers, accounting for 24% of all projects globally.
Krishnan believes India's core strength lies in "developing applications" that can generate revenue for AI companies.
Microsoft's Strategic Advantage
Tarun Pathak, research director at Counterpoint Research, suggests that Microsoft's substantial investment provides a competitive edge. He explained, "This scale of capex gives Microsoft first-mover advantage in GPU-rich data centers while making Azure the preferred platform for India’s AI workloads, as well as deepening alignment with the government’s AI public infrastructure push."
Beyond Microsoft and Amazon, other major players like OpenAI, Google, and Perplexity have recently provided Indian users with free access to their AI tools. Google is also proceeding with plans to invest $15 billion in data center capacity for a new AI hub in southern India.
Pathak attributes India's appeal to a combination of factors: "India combines a huge digital user base, rapidly growing cloud and AI demand, and a high-talent IT ecosystem that can build and consume AI at scale, making it more than just a market for users and instead a core engineering and deployment hub."
Favorable Conditions for Data Centers
The development of data centers in India is strategically advantageous due to saturation in other Asia Pacific markets such as Japan, Australia, China, and Singapore. Singapore, a long-standing data center hub, has limited capacity for new large-scale facilities.
India offers ample land for extensive data center construction and benefits from lower power costs compared to European hubs. The country's increasing renewable energy capacity is also a crucial factor for these power-intensive facilities.
Domestic demand for data services is also robust, driven by years of growth in online shopping. Additionally, potential new regulations requiring social media companies to store data within India could further boost demand for data center infrastructure.
A Convergence of Growth Factors
These converging factors position India as a highly attractive market. The simultaneous growth of global cloud companies, AI innovation, and domestic digital expansion is creating one of the most dynamic data center markets worldwide.
Deepika Giri, associate vice president and head of research for big data and AI at International Data Corporation, highlighted India's critical role. She stated, "India is a pivotal market and one of the fastest-growing regions for AI spending in Asia Pacific." She identified a significant opportunity in the "shortage of suitable compute infrastructure for running AI models."
Technology companies are increasingly establishing data centers in locations beyond traditional coastal hubs. They are expanding into cities like Bangalore, Hyderabad, and Pune, moving closer to established IT centers, rather than solely relying on Mumbai and Chennai, which are near undersea cable landing points. Krishnan noted that these companies are building data centers in India to serve a global customer base, not exclusively local markets.