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

The Mountain View, California-based tech giant’s largest investment in India pushes Big Tech’s ‘announced’ AI infrastructure bets in the country to $25 billion this year, with another $6.5 billion likely but unconfirmed. The push by the American majors comes in the backdrop of US President Donald Trump’s urging to tech giants to pump in more dollars at home.

In a press statement, Google said its planned facility “will include a purpose-built data center campus, adding gigawatt-scale compute capacity to help meet demand for digital services across India and around the world". For this venture, the company will partner with Indian conglomerate Adani Enterprises’ data centre business and telecom services operator Bharti Airtel.

On 7 January, Satya Nadella, chairman and chief executive of Microsoft, announced a $3-billion investment to set-up cloud and AI infrastructure in the country. On 23 January, Amazon Web Services (AWS), the world’s largest cloud services provider by market share, announced a $6.8-billion outlay to set-up data centres and cloud services in Hyderabad, Telangana.

In September, Bloomberg reported that OpenAI is planning to build 1 gigawatt (GW) capacity for data centres to cater to its AI operations in India. OpenAI is yet to confirm the investment, but if it comes to fruition, back-of-the-envelope calculations based on a TCS statement show it will likely cost at least $6.5 billion to set-up.

TCS (Tata Consultancy Services), India’s biggest IT services provider, had said on 9 October that a data centre of 150 megawatt (MW) capacity costs $1 billion to set up.

“Having a large-scale, cutting-edge AI data centre facility in India proves to be a sign of confidence for global infrastructure providers that such large facilities are in the market," S. Krishnan, secretary at the Union ministry of electronics and IT, told Mint. “As such facilities scale up, the cost of compute starts rationalising, which is a great sign for the AI market overall."

Anushree Verma, senior director analyst for emerging technologies at Gartner, said such investments are expected to ramp up in the next five years, pointing to the fact that India is already one of the biggest consumers of AI services and data in the world.

“While monetization of AI will play out eventually, India will represent one of the biggest geographies globally by volume for Big Tech—in terms of the need for sovereign AI applications and services. As use cases rise, immediate expansion of data centres will serve local markets themselves—instead of global ones," Verma said.

She added that the availability of government incentives, lower operational costs, and India’s under-penetrated market made the country an attractive choice for Big Tech in serving the domestic market.

A 27 March research note by brokerage firm JM Financial said that over the next five years, India would attract incremental investments of $80 billion to ramp up AI, cloud and data centre facilities.

The research note stated India’s total data centre capacity at 1.35GW at the end of last year. JM Financial projected this capacity to increase to 5GW by 2030, possibly reaching data penetration of 50% of China’s by this time.

India’s advantages

Now, Big Tech is cashing in on this opportunity, leading states to compete against each other to draw large-scale investments. Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu and Telangana are offering subsidies such as electricity duty waivers, land subsidies of up to 50% and more, to draw in tech facilities.

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

India also comes with a relative cost advantage. JM Financial’s note said that the cost of data centre establishment in India is $7 per megawatt—among the lowest globally—compared with $10–11 in the US, and $13–16 in Japan.

Power, too, is roughly 20% cheaper than in the US. These fundamentals make India one of the most attractive destinations for colocation operators, whose facilities—where companies rent server space—can yield Ebitda margins of 60-70%, and pre-tax returns of around 12%. Ebitda refers to earnings before interest, tax, depreciation and amortization.

“The new facilities are also bringing in data centres to cities apart from Mumbai and Chennai, which in turn establish new landing sites for global undersea cables in India—which yet again benefits India’s overall technology infrastructure landscape," Krishnan said.

Home run

Big Tech, though, is not the only ones—homegrown firms are in the ring, too.

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

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

Adani and Reliance have also signed some marquee partnerships. When Nvidia chief Jensen Huang visited India last October, he inked a partnership with Reliance chair Mukesh Ambani to develop data centres using Nvidia's processors, which are the most advanced AI processors in the world by a wide margin. The starting capacity would be 1GW and would be scaled up from there.

For context, all India’s operational data centre capacity is expected to be around 2GW by the end of 2025, as per one estimate by Sify, a leading data centre company.

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

Adani Enterprises, meanwhile, announced its own big tie-up with Google on Tuesday.

Adani already has 37MW of operational data centre capacity as of June. It has tied up an additional 210MW capacity. Reliance's maiden data centre is still under construction. Larsen & Toubro, another leading conglomerate, which has been developing data centres for several years now for others, is now looking to make these digital warehouses for itself. L&T has about 32MW of operational capacity.