Why Big Tech is doubling down on India with billions in investment
A slogan about Artificial Intelligence (AI) is displayed on a screen in the Intel pavilion during the 54th annual meeting of the World Economic Forum in Davos, Switzerland, on January 16, 2024.
Denis Balibouse | Reuters
Big Tech is doubling down on investing billions of dollars in India due to the abundance of resources, large pool of talent and digital users, and market opportunity to build data centres.
In less than 24 hours, Microsoft and Amazon have pledged more than $50 billion towards India’s cloud and AI infrastructure, while Intel on Monday announced plans to produce chips in the country to capitalize on rising PC demand and the rapid adoption of AI.
While India lags behind the US and China in the race to develop a domestic AI foundational model and does not have a major domestic AI infrastructure company, it is looking to leverage its expertise in the information technology sector to build and deploy enterprise-level AI applications, presenting a huge opportunity for Big Tech companies.
S. Krishnan, secretary of India’s Ministry of Electronics and Information Technology, told CNBC that having a model or informatics is not enough for any organization to use AI effectively, and companies need to build the application layer and need a large pool of talent to deploy them.
Stanford University ranks India among the top four countries along with the USA, China and the UK global and national artificial intelligence vitality arrangement. GitHub, a community of developers, ranked India at the top with a global share of 24% of all projects.
Krishnan said India’s opportunity lies more in “developing applications” that will be used to increase revenues for AI companies.
Microsoft on Tuesday announced a $17.5 billion investment over four years aimed at expanding hyperscale infrastructure, deploying AI on national platforms, and improving workforce readiness.
“This scale of capital expenditure gives Microsoft a first-mover advantage in GPU-rich data centers, making Azure the platform of choice for India’s AI workloads and deepening its alignment with the government’s AI overall infrastructure push,” said Tarun Pathak, Research Director at Counterpoint Research.
Amazon announced Wednesday that it plans to invest more than $35 billion in the country, on top of the $40 billion it has already invested.
Over the past few months, AI and technology giants such as OpenAI, Google and Perplexity have made their tools available for free to millions in India; Google also strengthened plans to invest $15 billion to build data center capacity for a new AI center in southern India.
“India combines a large digital user base, rapidly growing demand for cloud and AI, and a highly capable IT ecosystem that can build and use AI at scale, making it a core engineering and delivery hub more than just a market for users,” Pathak said.
Data center opportunity
India has many advantages when it comes to building data centres. Markets in the Asia Pacific region such as Japan, Australia, China and Singapore have matured. Singapore, one of the oldest data center hubs in the region, has limited space for the deployment of large-scale data centers due to land availability issues.
India has ample scope for large-scale data center developments. Compared to data center hubs in Europe, energy costs in India are relatively low. Combined with India’s growing renewable energy capacity (critical for power-hungry data centres), the economics are starting to look attractive.
This is reinforced by local demand fueled by the rise of e-commerce, which has been a major driver of data center growth in recent years, and potential new rules for storing social media data.
Simply put: India is entering a sweet spot where global cloud providers, AI players and local digitalization are coming together to create one of the hottest data center markets in the world.
“India is a very important market and one of the fastest growing regions for AI spending in Asia Pacific,” said Deepika Giri, executive vice president and head of research, big data and AI at International Data Corporation.
“A major gap, and thus a significant opportunity, lies in the lack of appropriate computing infrastructure to run AI models,” he added. Big Tech wants to capitalize on the infrastructure opportunity in India by investing heavily in the cloud and data center space.
Krishnan said as global companies build data centers for the world in India, they are expanding their capacity from traditional hubs like Mumbai and Chennai to service bases closer to service bases in IT cities like Bangalore, Hyderabad and Pune.
— CNBC’s Dylan Butts and Amitoj Singh contributed to this report.
