With Mark Zuckerberg promising to pour hundreds of billions of dollars into AI infrastructure, sceptics wondered how his social media empire would monetize that expensive bet. We now have a plausible answer. Meta is turning a capital-expenditure drag into a new revenue source.
An internal initiative dubbed ‘Meta Compute’ plans to lease out excess capacity to enterprise clients. It remains to be seen if it can make a dent in the domination of Microsoft, Alphabet and Amazon over the cloud business.
But to see where the early tremors will be felt, look to India. Zuckerberg’s entry into the cloud-capacity game is about to fundamentally reshape the rivalry between two of Asia’s richest tycoons, Mukesh Ambani and Gautam Adani.
Until recently, Adani seemed to be pulling ahead in the AI infrastructure craze gripping India. He has been aggressively building out hyperscale server farms, having secured a prized partnership to provide infrastructure for Google. For a billionaire who specializes in ports, airports and power grids, moving into data centres seemed a natural progression.
But those plans collide with Ambani’s ambitions. If digital real estate is an obvious focus of expansion for Adani’s empire, AI for individual and enterprise customers is equally crucial for the Ambani flagship, Reliance Industries. The conglomerate wants to send its telecom and media unit Jio into public markets with a technology spin. Meta had bought 9.99% of Jio in 2020.
Neither Ambani nor Adani has a presence in software outsourcing. And that is a good thing —for them. The arrival of Generative AI has upended the economics of India’s No. 1 services export. The advantage now lies with capitalists harnessing solar and wind power to produce AI tokens on the cheap.
Meta’s engineers are building their proprietary silicon in Bengaluru, while Gujarat takes the lead in generating power for the token factories. That is where Adani has put up the world’s largest single-location clean-energy project as part of a $100 billion AI compute push. Now Ambani is upping the ante with a facility thrice the size of Singapore. When complete, it will be one of the lowest-cost sources of round-the-clock green power anywhere in the world, the Reliance group claims.
A customer has already arrived. Last month, Ambani announced a partnership with Meta to establish a 168MW data centre in Gujarat. On paper, it looks like a standard infrastructure lease. However, for India’s corporate sector that will ultimately pay for the compute, the allure is data sovereignty.
In highly regulated industries like telecom, banking, healthcare and defence, the cloud was a compliance minefield even before AI. Moving sensitive customer information onto the US-centric public clouds of Amazon, Google or Microsoft often invites intense regulatory scrutiny over where data is stored and who has access to it.
That is where the Reliance-Meta alliance may alter the competitive landscape. The AI engine and the sensitive enterprise data feeding it remain firmly on Indian soil, and under the control of Reliance Enterprise Intelligence, in which the local group holds 70% equity and Meta owns 30%.
Amazon’s AWS, Microsoft’s Azure and Google Cloud built their empires on general-purpose enterprise storage. While Meta may have no interest in hosting a company’s payroll software, there are other pathways to drum up enterprise demand.
Zuckerberg recently hired an Indian fintech leader to run WhatsApp globally. He seems to want to extend his dominance of the country’s social media landscape into online commerce and payments. India already has developers with experience in building chatbots with Llama. Next up is Muse Spark. The proprietary AI engine purpose-built by Meta to handle conversational commerce may be just the tool for local firms to run digital storefronts.
Neither Ambani nor Adani seems keen to take high-risk bets to build foundational AI models from scratch. That is a capital-intensive game they seem content to leave to Silicon Valley and China. In the global division of AI labour, Indian conglomerates would rather build launchpads than rockets.
Adani remains a formidable player, especially with Google as a strategic partner. Alongside solar and wind, the tycoon also has big plans for nuclear power. That could be another arrow in his quiver to bring down token costs by offering the uninterrupted baseload power required to run AI queries around the clock.
Still, the Meta-Reliance tie-up has raised the bar for competition. For Zuckerberg, India is the perfect lab to prove that Meta can succeed in enterprise cloud services. And for Ambani, it is yet another demonstration that in the theatre of Indian capitalism, his mastery of alliances is what makes him a major actor. ©Bloomberg
The author is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.