A slogan related to Artificial Intelligence (AI) is displayed on a screen in Intel pavilion, during the 54th annual meeting of the World Economic Forum in Davos, Switzerland, January 16, 2024.
Denis Balibouse | Reuters
Big Tech is doubling down on investing billions in India, drawn by its abundance of resources for building data centers, a large talent and digital user pool, and market opportunity.
In under 24 hours, Microsoft and Amazon pledged more than $50 billion toward India’s cloud and AI infrastructure, while Intel on Monday announced plans to make chips in the country to capitalize on its growing PC demand and speedy AI adoption.
While India trails the U.S. and China in the race to develop a native AI foundational model, and lacks a large domestic AI infrastructure company, it wants to leverage its expertise in the information technology sector to create and deploy AI applications at enterprise level, also offering Big Tech companies a huge opportunity.
Having a model or computing is not enough for any enterprise to use AI effectively, and it requires companies making application layer and a large talent pool to deploy them, S. Krishnan, secretary at India’s Ministry of Electronics and Information Technology, told CNBC.
Stanford University ranks India among the top four countries along with the U.S., China and the UK in the global and national AI vibrancy ranking. GitHub, a community of developers, has ranked India at the top with the global share of 24% of all projects.
India’s opportunity lies more in “developing applications” which will be used to drive revenues for AI companies, Krishnan said.
On Tuesday, Microsoft announced $17.5 billion in investment in the country, spread over 4 years, aimed at expanding hyperscale infrastructure, embedding AI into national platforms, and advancing workforce readiness.
“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,” said Tarun Pathak, research Director at Counterpoint Research.
Amazon on Wednesday announced plans to invest over $35 billion, on top of the $40 billion it has already invested in the country.
Over the past few months, AI and tech majors such as OpenAI, Google, and Perplexity have offered their tools for free to millions in India, with Google also firming up its plans to invest $15 billion toward building data center capacity for a new AI hub in southern India.
“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,” Pathak said.
Data center opportunity
India has several advantages when it comes to building data centers. Markets such as Japan, Australia, China and Singapore in the Asia Pacific region have matured. Singapore, one of the oldest data center hubs in the region, has limited room to deploy large-scale data centers due to land availability issues.
India has abundant space for large-scale data center developments. When compared with data center hubs in Europe, power costs in India are relatively low. Coupled with India’s growing renewable energy capacity — critical for power-hungry data centers — and the economics begin to look compelling.
Local demand, fueled by the rise of e-commerce — a major driver of data center growth in recent years — and potential new rules for storing social media data, strengthens the case.
Put simply: India is entering a sweet spot where global cloud providers, AI players, and domestic digitalization all converge to create one of the world’s hottest data center markets.
“India is a pivotal market and one of the fastest‑growing regions for AI spending in Asia Pacific,” said Deepika Giri, associate vice president and head of research, big data & AI, at International Data Corporation.
“A major gap, and therefore a significant opportunity, lies in the shortage of suitable compute infrastructure for running AI models,” she added. Big Tech is looking to capitalize on the infrastructure opportunity in India by investing heavily in the cloud and data center space.
Global companies are expanding capacities closer to service bases in IT cities such as Bangalore, Hyderabad and Pune from traditional centers like Mumbai and Chennai which are closer to landing cables, as they build data centers in India for the world, Krishnan said.
— CNBC’s Dylan Butts, Amitoj Singh contributed to this report.
