Over $50 billion in under 24 hours: Why Big Tech is doubling down on investing in India
A slogan related to Artificial Intelligence (AI) is displayed on a screen in the Intel pavilion at the 54th annual meeting of the World Economic Forum in Davos, Switzerland, on January 16, 2024.
Denis Balibouse | Reuters
Big Tech is pouring billions into India, attracted by its vast resources for data centers, a large talent pool, digital user base, and market potential. In a 24-hour period, Microsoft and Amazon pledged over $50 billion for India's cloud and AI infrastructure, while Intel announced plans to manufacture chips in the country to meet growing PC demand and AI adoption.
Despite India's lag in developing native AI foundational models compared to the U.S. and China, and its lack of a large domestic AI infrastructure company, the country aims to leverage its IT expertise to create and deploy enterprise-level AI applications, presenting a significant opportunity for Big Tech.
S. Krishnan, secretary at India's Ministry of Electronics and Information Technology, emphasizes that having a model or computing power alone is insufficient for effective AI usage. It requires application layer development and a substantial talent pool for deployment.
Stanford University ranks India among the top four countries globally, alongside the U.S., China, and the UK, in terms of AI vibrancy. GitHub, a developer community, places India at the top with a 24% global share of all projects.
Krishnan highlights India's opportunity in 'developing applications' to drive AI company revenues.
On Tuesday, Microsoft committed $17.5 billion over four years to expand hyperscale infrastructure, integrate AI into national platforms, and enhance workforce readiness in India.
Tarun Pathak, research director at Counterpoint Research, notes that this level of investment gives Microsoft a first-mover advantage in GPU-rich data centers, making Azure the preferred platform for India's AI workloads and aligning closely with the government's AI public infrastructure push.
Amazon, on Wednesday, announced plans to invest over $35 billion, in addition to the $40 billion already invested in the country.
Over the past months, major AI and tech companies like OpenAI, Google, and Perplexity have offered their tools for free to millions in India. Google is also investing $15 billion to build data center capacity for a new AI hub in southern India.
Pathak highlights India's combination of a vast digital user base, rapidly growing cloud and AI demand, and a high-talent IT ecosystem, making it a core engineering and deployment hub rather than just a market for users.
India's data center opportunities are bolstered by its abundant space for large-scale developments, relatively low power costs compared to European hubs, and a growing renewable energy capacity, which is crucial for power-intensive data centers.
Local demand, driven by e-commerce and potential new rules for social media data storage, further strengthens the case for India's data center market.
In summary, India is entering a sweet spot where global cloud providers, AI players, and domestic digitalization converge, creating one of the world's hottest data center markets.
Deepika Giri, associate vice president and head of research, big data & AI at International Data Corporation, emphasizes the significant opportunity in the shortage of suitable compute infrastructure for running AI models, which Big Tech is eager to capitalize on through heavy investments in the cloud and data center space.
Global companies are expanding capacities closer to IT cities like Bangalore, Hyderabad, and Pune, as they build data centers in India for the world, according to Krishnan.
CNBC's Dylan Butts and Amitoj Singh contributed to this report.
