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

Satya Nadella, the CEO of Microsoft Corp., made headlines during his recent trip to India by announcing a significant investment of $17.5 billion. This announcement came shortly after his meeting with Prime Minister Narendra Modi in New Delhi and marks Nadella's second visit to the country this year. With this latest pledge, Microsoft’s total investment in India for 2025 has reached $20.5 billion, following a prior commitment of $3 billion to enhance artificial intelligence (AI) infrastructure and skill development during his January visit. The tech giant revealed that this is its most substantial investment in Asia to date, although it has not disclosed the overall capacity of its data centers in India. The investment will see the establishment of a new data center in Hyderabad, expected to be operational by June 2026, along with the expansion of three existing facilities located in Chennai, Mumbai, and Pune. In addition, Microsoft announced the official launch of its sovereign cloud services, which will cater to both government and private sector clients. India is quickly becoming a focal point for major tech companies. Just weeks ago, Google revealed a $15 billion investment for a new AI data center in Visakhapatnam, which is set to be its largest AI infrastructure project outside the United States. Furthermore, Amazon Web Services disclosed plans to invest $7 billion to develop data centers in Telangana, building on its previous investments in various Indian states. OpenAI, the leading AI startup, is also rumored to be planning a $7 billion investment in a 1 gigawatt (GW) data center in India, although no official announcement has been made yet. Overall, the combined AI-focused data center investments from major tech players, including Microsoft's latest commitment, are projected to reach $42.5 billion in 2025. Domestic companies are keeping pace with these developments. Recently, Reliance Industries announced a 1 GW data center project with a hefty investment of $11 billion through its Digital Connexion joint venture. Additionally, Larsen & Toubro, India’s largest engineering firm, is set to invest nearly $3 billion for 300 megawatts (MW) of data center capacity, with plans for future expansion. The Tata group, through Tata Consultancy Services (TCS), is also investing $7 billion to establish a 1 GW data center facility. Puneet Chandok, president of Microsoft India and South Asia, previously indicated that the company would announce larger data center investments soon, emphasizing that their investments are structural rather than episodic. He noted a growing interest in sovereign cloud adoption among various sectors, including government agencies, which are keen on compliance and regulation. Sovereign cloud solutions are becoming increasingly vital for AI and cloud service providers, with Microsoft taking a keen interest in this area. Analysts suggest that while Microsoft may not be racing ahead in AI development at the same pace as Google, its established presence and strong ties with India’s public sector position it well to capitalize on the growing demand for AI solutions as enterprises begin to implement these technologies on a larger scale.