India’s AI ambitions supercharged with Google’s $15-billion data centre investment

Mountain View, California-based tech giant’s largest investment in India takes Big Tech’s “announced” AI infrastructure investments in the country to $25 billion this year; It is stated that the other $6.5 billion is also possible but has not been confirmed. This move by American giants comes against the background of US President Donald Trump’s call for technology giants to pump more dollars into their homeland.

In a press release, Google said its planned facility “will include a purpose-built data center campus that adds gigawatt-scale computing capacity to help meet demand for digital services in India and around the world.” For this initiative, the company will partner with Bharti Airtel, the data center business and telecom services operator of Indian conglomerate Adani Enterprises.

On January 7, Satya Nadella, Microsoft’s chairman and chief executive, announced that he would invest $3 billion to build cloud and artificial intelligence infrastructure in the country. On January 23, Amazon Web Services (AWS), the world’s largest cloud services provider by market share, announced that it would spend $6.8 billion to set up data centers and cloud services in Hyderabad, Telangana.

In September, Bloomberg OpenAI plans to build 1 gigawatt (GW) of capacity for data centers to cater for its AI operations in India, it said. OpenAI has not yet confirmed the investment, but if the investment goes through, back-end calculations based on TCS’s statement indicate that the setup will likely cost at least $6.5 billion.

India’s largest IT services provider, TCS (Tata Consultancy Services), announced on October 9 that establishing a data center with a capacity of 150 megawatts (MW) would cost $1 billion.

“Having a large-scale, state-of-the-art AI data center facility in India proves to be a sign of confidence for global infrastructure providers that such large facilities are in the market,” said S. Krishnan, secretary, Union ministry of electronics and IT. Mint. “As these types of facilities scale, the cost of computing is starting to rationalize, which is a great sign for the AI ​​market in general.”

Anushree Verma, senior analyst for emerging technologies at Gartner, said such investments are expected to increase over the next five years, pointing out that India is already one of the largest consumers of artificial intelligence services and data in the world.

“While AI monetization will eventually come to an end, India will represent one of the largest geographies globally in terms of volume for Big Tech in terms of the need for standalone AI applications and services. As use cases increase, immediate expansion of data centers will serve local markets rather than global markets,” Verma said.

He added that the availability of government incentives, lower operating costs and India’s under-penetrated market make the country an attractive choice for Big Tech to serve the domestic market.

Over the next five years, India will attract $80 billion in incremental investment to strengthen its AI, cloud and data center facilities, brokerage firm JM Financial said in a March 27 research note.

India’s total data center capacity was 1.35 GW at the end of last year, the research note said. JM Financial has predicted that this capacity will grow to 5 GW by 2030, likely reaching 50% data penetration of China by then.

India’s advantages

Now Big Tech is taking advantage of this opportunity and driving states to compete with each other to attract large-scale investments. Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu and Telangana offer subsidies like electricity tax exemptions, land subsidies of up to 50% and more to avail technology facilities.

While Hyderabad received AWS’s $6.8 billion investment in India, Andhra Pradesh received Google’s investment on Tuesday. Mumbai and Chennai also remain on the radar.

India also has a relative cost advantage. The cost of setting up a data center in India is $7 per megawatt (one of the lowest costs globally), compared to $10-11 in the US and $13-16 in Japan, JM Financial said in a note.

Electricity is also about 20% cheaper than in the US. These fundamentals make India one of the most attractive destinations for colocation operators, where facilities where companies rent server space can deliver EBITDA margins of 60-70% and pre-tax returns of around 12%. EBITDA refers to earnings before interest, taxes, depreciation and amortization.

“The new facilities also bring data centers to cities outside Mumbai and Chennai, creating new landing sites for global subsea cables in India, again benefiting India’s overall technology infrastructure environment,” said Krishnan.

home run

But Big Tech is not alone; Domestic companies are also in the ring.

India’s leading conglomerates Reliance Industries and Adani Group are racing to operationalize 1 GW of data center capacity each in the next few years. Adani, which has a 50:50 joint venture with EdgeConneX called AdaniConneX, is banking on its prowess in renewable energy to help it gain a competitive advantage over its peers.

Meanwhile, Reliance Industries is also betting on scale. The company is developing a renewable energy complex in Jamnagar in Gujarat, where gigawatts of clean electricity generated from solar panels produced on campus will power large data centres.

Adani and Reliance have also signed some important partnerships. When Nvidia chairman Jensen Huang visited India last October, he signed a partnership with Reliance chairman Mukesh Ambani to develop data centers using Nvidia processors, by far the world’s most advanced AI processors. The initial capacity will be 1 GW and scale will be increased from there.

In this context, India’s entire operational data center capacity is expected to be around 2 GW by the end of 2025, according to a forecast from Sify, a leading data center company.

Reliance also announced AI partnerships with Google and Meta at its annual general meeting in August. The data centers in Jamnagar will be built as per Google Cloud’s specifications. Facebook’s parent company Meta will form a joint venture with Reliance to create an open-source AI platform as a service with an investment of $100 million. Reliance will hold 70% stake in this venture.

Meanwhile, Adani Enterprises on Tuesday announced a major partnership with Google.

Adani currently has 37 MW of operational data center capacity as of June. An additional 210 MW capacity was connected. Reliance’s first data center is still under construction. Larsen & Toubro, another leading conglomerate that has been developing data centers for others for several years, is now looking to create these digital warehouses for itself. L&T has an operational capacity of around 32 MW.