India’s AI data centres could unlock $23 billion investment opportunity: Report

Mumbai, May 27 (IANS) Rising AI adoption could drive deployment of 650,000-700,000 GPUs in India’s data centres over the next five years, creating a $23 billion investment opportunity, a report said on Wednesday.

With this, India’s data centre capacity is set to grow at a 26 per cent CAGR over the next five years, according to the report by Avendus Capital.

The AI-led infrastructure demand, alongside rising cloud and digital adoption, is expected to nearly triple India’s built data centre capacity from 1.6 GW in 2025 to 5 GW by 2030.

Developers currently have an active pipeline of over 3 GW, including 1 GW of AI data centre capacity, requiring a total capital investment of nearly $25 billion over the next five years.

India’s AI market is projected to grow from $13 billion in 2025 to $131 billion by 2032 at a 39 per cent CAGR, supported by rising enterprise adoption and investments in domestic AI capabilities, including the development of indigenous large language models (LLMs).

“AI adoption is emerging as a significant catalyst for next-generation infrastructure investments in data centres, alongside sustained demand from cloud and digital workloads,” said Vaibhav Garg, Director, Infrastructure and Real Assets Investment Banking, Avendus Capital.

This dual demand trajectory has already translated into $5 billion of transaction activity over the last three years, with backing from global institutional investors, infrastructure funds, and strategic operators.

“Going forward, we also expect public markets and other strategic transactions to play a key role in funding India’s data centre growth, with 3-4 IPOs expected in the next three years,” he mentioned.

Mumbai is expected to remain India’s largest data centre hub, contributing to nearly half of the country’s installed and upcoming capacity over the next five years, said the report.

A key insight is the emergence of GPU infrastructure as a high-return generating segment within the Indian data centre ecosystem.

At current capex and pricing levels, large-scale GPU deployments can deliver equity IRRs of over 28 per cent (hold-to-maturity), said the report. Equity IRR (levered IRR) is the annualised percentage return generated on the actual money invested by shareholders.

The report also highlights rising private market activity in the sector, with global data centre transactions currently being consummating at EBITDA multiples of 20–30 times.

--IANS

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