AI Expansion in India May Spur $23 Bn Data Centre Investments, Says Report

Artificial intelligence adoption could drive the deployment of 650,000 to 700,000 graphics processing units, which are specialised electronic circuits designed to accelerate parallel computing workloads, in Indian data centers over five years, creating a $23bn investment opportunity, according to 'Data Centres' report published by Avendus Capital.

Simultaneously, Colliers released a global report, 'Building Resilience: 5 Megatrends Redefining Corporate Real Estate' which details how AI-enabled workforces, demographic shifts, energy scarcity and security, climate risks and a shifting global order are reshaping global real estate. Together, the reports illustrate how emerging technology and demographic shifts will define India's corporate infrastructure boom over the next decade.

"AI adoption is emerging as a significant catalyst for next-generation infrastructure investments in data centers, alongside sustained demand from cloud and digital workloads. This dual demand trajectory has already translated into $5bn of transaction activity over the last three years, with backing from global institutional investors, infrastructure funds and strategic operators," Vaibhav Garg, Director of Infrastructure and Real Assets Investment Banking at Avendus Capital, stated in the news release.

The report published by Avendus further stated that public markets and other strategic transactions will play a key role in funding India’s data center growth.

"Three to four IPOs are expected within the next three years, which will provide critical liquidity and enable institutional investors to execute capital recycling structures on a hold-to-maturity basis," Garg added.

India’s AI Infrastructure Push

According to the Avendus report, India's built data centre capacity will nearly triple from 1.6 gigawatts in 2025 to about 5 gigawatts by 2030. The nation's capacity is projected to grow at a 26% compound annual growth rate over the next five years.

Developers have an active pipeline exceeding 3 gigawatts, including about 1 gigawatt of AI data center capacity, requiring a $25bn capital investment over five years. Mumbai is expected to remain India's largest data center hub, contributing nearly half of the new capacity over this period.

Large-scale GPU deployments can deliver equity internal rates of return over 28 percent on a hold-to-maturity basis, as per the Avendus report. The report also highlighted rising private market activity in the sector, with global data center transactions currently being consummated at EBITDA multiples of 20 to 30 times.

Investors are increasingly exploring REITs, real estate investment trusts and InvITs (infrastructure investment trusts) as capital recycling structures, given the sector’s long-term contracts and stable cash flow profile.