India's AI Data Centres May Deploy Up to 700,000 GPUs in 5 Years
An increase in artificial intelligence (AI) use may lead to the installation of 650,000-700,000 graphics processing units (GPUs) in India’s data centres in the coming five years, presenting a $23 billion investment potential, as per a report from Avendus Capital.
The report predicts that India’s data centre capacity will expand at a compound annual growth rate (CAGR) of 26 percent in the next five years, fueled by the demand for AI infrastructure, increased cloud adoption, and swift digitalisation.
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The report states that India's existing data centre capacity is anticipated to almost triple from 1.6 gigawatts (GW) in 2025 to around 5 GW by 2030. Developers now possess an ongoing pipeline exceeding 3 GW, encompassing close to 1 GW of data centre capacity centered on AI, necessitating a total capital investment of roughly $25 billion in the upcoming five years.
The report highlighted that conventional data centers were mainly created for cloud storage and business tasks. Nonetheless, AI applications necessitate infrastructure that is GPU-intensive, liquid cooling systems, increased rack density, and much higher power usage, fundamentally altering the economics and structure of data centres.
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A significant finding of the report is the rise of GPU infrastructure as a lucrative sector in India’s data centre landscape. Under existing capital expenditure and pricing conditions, extensive GPU installations could yield an equity internal rate of return (IRR) of 25.5 percent, alongside payback times of less than three years.
The report anticipates India's AI market will expand from $10 billion in 2024 to $131 billion by 2032, achieving a CAGR of 39 percent. This expansion is anticipated to be fueled by increasing corporate acceptance and investments in local AI resources, such as the creation of homegrown large language models (LLMs).
The report additionally underscored the increasing activity in the private market within the sector, observing that global data centre deals are presently occurring at earnings before interest, tax, depreciation, and amortisation (Ebitda) multiples of 20-30 times.
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are being increasingly considered as capital recycling mechanisms due to the industry's long-term agreements and consistent cash-flow characteristics. International investors like Blackstone, KKR, Brookfield, Digital Realty, Warburg Pincus, and Mubadala are supporting Indian data center companies.
The report highlighted the rise of "AI factories," large-scale computing campuses designed specifically for the lifecycle of AI applications, encompassing training, tuning, and inference. As these facilities need large GPU clusters, they are frequently being developed in decentralized areas with ample land, electricity, and fiber connectivity.
Though Mumbai presently holds almost 50 percent of India's overall data centre capacity, the report indicated that Hyderabad is rising as a significant AI center, with Microsoft Azure and Amazon Web Services growing rapidly in the city.
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The report noted that three new international subsea cables are anticipated to arrive in Chennai between 2026 and 2027, a change that could greatly enhance the city’s attractiveness for hyperscale and AI operations.