AI boom: Why US tech giants are betting on India
What's the story
India is fast becoming a major hub for American tech giants looking to expand their artificial intelligence (AI) capabilities. The country's massive population of over one billion digitally-savvy users makes it an attractive market. The Indian government recently announced a 20-year tax break on overseas revenue earned from globally delivered data services based locally, further enticing foreign tech investment.
AI roadmap
AI service hub strategy
The Indian government's new policy is part of a larger plan to make the country a major provider of AI services. The focus will be on cost-effective solutions for local problems, while cutting-edge model development will be left to well-funded US and Chinese companies. "This will give India the opportunity to become a major AI hub," said Ashwini Vaishnaw, India's IT Minister.
Investment surge
Major investments in Indian data centers
Leading tech companies have already announced major investments in India's data centers. In October, Google announced a $15 billion investment in southeastern India for data centers and undersea cable links. Microsoft followed suit with a record $17.5 billion investment to boost the country's cloud and AI infrastructure. Amazon also pledged to invest $35 billion across its Indian operations by 2030.
Data demand
New data privacy regulations
India's massive data consumption has attracted hyperscalers, or large data-center operators. A November report by Ericsson revealed that the Indian subcontinent consumes more mobile data per smartphone than any other region in the world. India has also introduced new data-privacy regulations mandating companies to store Indian user data locally, further bolstering its position as a key player in the global AI race.
Policy impact
New tax policy encourages global service hubs in India
The new tax policy has removed uncertainty over how global revenues would be taxed, encouraging companies to set up global service hubs in India. Indian officials see this strategy as a model for developing nations with high digital demand but limited capital for frontier AI research. The Modi government will host a major technology summit later this month in New Delhi to advance this vision.
Global positioning
Tech-savvy developing countries can replicate India's model
Despite producing 20% of the world's data, India only stores 3% of it, according to CareEdge Ratings. The new tax policy is expected to change this by encouraging tech companies to set up global service centers in India. The government hopes that this model will be replicated by other developing countries with tech-savvy populations but limited resources for AI ecosystem development.