Nadella unveils Microsoft’s $17.5 bn AI data centre push in India

Microsoft Corp. chief executive Satya Nadella on Tuesday marked the year's second visit to India with a commitment to invest $17.5 billion in data centres, hours after meeting Prime Minister Narendra Modi in New Delhi.

That brings Microsoft’s total India investment commitments in 2025 to $20.5 billion, including a $3 billion initiative announced during Nadella's January visit to build artificial intelligence (AI) infrastructure and provide skilling.

The US tech giant said this was its largest investment in Asia to date, but did not specify the total capacity for its data centres in India. The plan includes a new data centre in Hyderabad, set to open by June 2026, alongside the expansion of its three existing data centres in Chennai, Mumbai, and Pune.

The company also announced the formal rollout of its sovereign cloud offerings, which cater to both government clients and private enterprises.

As part of its new investment, Microsoft will train an additional 10 million people in AI skills to bring the total number of people trained in Microsoft’s AI tools to 20 million, the company said.

The new frontier

India's AI and data-centre opportunity is drawing Big Tech giants. On 14 October, Microsoft’s rival Google announced a $15-billion investment for an AI data centre in Visakhapatnam, with a planned capacity of 1 gigawatt (GW). Google had said at the time that this would be its largest AI infrastructure outside of the US.

On 23 January, Amazon Web Services, the world’s largest cloud services provider, also announced that it would invest $7 billion to build data centres in Telangana, in addition to its existing investments in other Indian states previously announced.

OpenAI, the world’s largest AI startup, is also expected to spend nearly $7 billion for its own 1GW data centre in the country, although a formal announcement hasn’t been made yet.

Overall, Big Tech’s AI-centric data centre investment plans, including Microsoft's latest commitment, in the country in 2025 have reached $42.5 billion.

Domestic conglomerates, too, have stepped up their efforts. Last week, Reliance Industries Ltd announced a 1GW data centre through its Digital Connexion joint venture, with an investment of $11 billion. Larsen & Toubro Lt, India’s largest engineering group, said it would invest nearly $3 billion for 300 megawatt (MW) data centre capacity—which could expand in the future. The Tata group, the country's largest conglomerate, through Tata Consultancy Services Ltd (TCS), will invest $7 billion in a 1GW data centre facility as well.

On 5 December, Puneet Chandok, president of India and South Asia at Microsoft, had told Mint that the company was set to announce larger data centre investments to expand its infrastructure presence in the country.

“Our investments are not episodic; they are structural. Overall, we’re already seeing rising interest in sovereign cloud adoption from across sectors, including government clients and enterprises that are looking to keep up with regulation,” Chandok had said.

Chandok said Microsoft was also working with TCS for a sovereign cloud partnership. The company did not mention any such tie-up on Tuesday.

Sovereign cloud—or data centres to store and process information within a country's borders—is a key focus area for all AI and cloud service providers, including Microsoft. On 26 November, Seema Ambastha, chief executive of L&T’s cloud business, said the company expected nearly half of all its clients to come seeking sovereign cloud solutions, as critical sectors such as healthcare and financial services have to meet data-localization requirements.

Big boost

While Microsoft’s progress in AI has not kept pace with that of Google, its close relationship with India’s public sector and a long history of operations in the country could help it build commercial scale as the adoption of AI starts generating more revenue, according to analysts.

“Microsoft has a deep-seated presence in India and is typically seen by enterprises as one of the safest tech companies to work with in terms of compliance and security,” said Kashyap Kompella, veteran AI analyst and founder of RPA2AI Research.

“The company's AI journey, especially over the past year, has been mixed, as it opted to partner with OpenAI rather than developing its own foundational capabilities,” said Kompella. “But today, Microsoft stands as a company that will get a large volume of business, as enterprises start adopting AI at scale.”