India’s data center gold rush
A Nvidia HGX H100 server at the Yotta Data Services Pvt. data center in Navi Mumbai, India, on Thursday, Mar. 14, 2024.
Bloomberg | Bloomberg | Getty Images
This report is from this week’s CNBC’s “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big story
There’s a gold rush underway in India’s nascent but fast-growing data center industry, with global giants, billionaires and even luxury property developers piling in.
India’s current data center capacity is around 1.2 gigawatts — just a fraction of global capacity — but the market is set to more than double, crossing 3 gigawatts within the next five years, according to a report in May by real estate services and investment management firm Collier.
That growth is drawing in global data center companies, Indian billionaires, and even luxury real estate developers, all eager to stake their claim in what many see as the backbone of the country’s digital future.
In July, Google reportedly entered into talks with the Andhra Pradesh government to set up a 1 gigawatt facility. A month later, OpenAI’s Sam Altman announced that his company was exploring plans for a 1-gigawatt data hub in India.
These moves underline the scale of ambition: facilities once measured in tens of megawatts are now being planned in gigawatts, often by “hyperscalers,” or companies that consume vast amounts of computing power. One gigawatt is 1,000 megawatts of power, while a megawatt is 1 million watts.
Unsurprisingly, competition is fierce. More than 15 players are chasing market share — from global heavyweights like Japan’s NTT, Singapore’s Temasek-backed STT GDC and U.S. operator Equinix, to Indian conglomerates including Adani Group and Reliance Industries.
Real estate developers are also pivoting. Luxury realty developer Hiranandani Group’s Yotta Infrastructure, Delhi-based Anant Raj Developers and Pune-based Panchshil Realty are also pivoting from housing to hyperscalers, wagering billions to reposition themselves from builders of homes and offices into digital landlords.
What’s driving the boom?
At the heart of the surge is a structural shift in demand. About 60% of data center clients are enterprises, 30% are hyperscalers, and AI users are about 10%, according to data from property consulting firm Anarock Capital.
“As AI workloads rise, we expect use by enterprises to stay consistent, but hyperscalers’ use may rise to about 35%. AI users ‘ specific demand will potentially rise between 20% and 25%,” said Shobhit Agarwal, chief executive officer of Anarock.
Some examples of hyperscalers include large-scale data center operators like Microsoft, Amazon Web Services and Google.
The digitalization of banking in India and data localization regulations that require Indian financial data to be stored in the country have driven enterprise data demand, Alok Bajpai, managing director India of NTT Data Systems, told CNBC. The rise of e-commerce services, followed by cloud infrastructure companies, brought in the second wave of data center demand, he added.
Now the third wave is expected to come from AI workloads.
Last week, Equinix expanded into a second state in India through its first AI-focused facility in Chennai.
60% of Equinix’s revenues come from customers who work with the company across all three regions, Americas, Europe, Asia and “they are keen to expand into India”, Manoj Paul, country managing director of Equinix, said last Friday on CNBC’s “Inside India.”
Enterprise clients currently drive most of India’s data center demand, but their needs are relatively modest. As the customer profiles change, facilities are being designed to handle much larger workloads.
“Earlier, demand for enterprise-driven capacity rarely crossed 10 megawatts. With hyperscalers, requirements have risen to 25 megawatts, and in some cases 50 megawatts. With AI workloads, this could climb further to 75–100 megawatts,” said Bajpai of NTT Data Systems.
Why India?
On paper, India has several natural advantages. Markets like Japan, Australia, China and Singapore in the Asia Pacific region have matured. Singapore, one of the oldest data center hubs in the region, has limited room to deploy large-scale data centers due to land availability issues.
India has abundant space for large-scale data center developments. When compared with data center hubs in Europe, power costs in India are relatively low. Coupled with India’s growing renewable energy capacity — critical for power-hungry data centers — and the economics begin to look compelling.
Local demand, fueled by the rise of e-commerce — a major driver of data center growth in recent years — and potential new rules for storing social media data, strengthens the case.
Put simply: India is…
Read More: India’s data center gold rush