India’s Data Centre Sector Eyes USD 23 Billion AI Opportunity

India’s rapid adoption of artificial intelligence could trigger one of the country’s biggest infrastructure buildouts yet, with nearly 6,50,000–7,00,000 GPUs expected to be deployed in Indian data centres over the next five years, according to a new report by Avendus Capital. The investment bank’s annual Data Centres report estimates this shift could create a USD 23 billion investment opportunity while driving India’s data centre capacity to grow at a compound annual growth rate (CAGR) of 26% over the next five years. The report highlights how rising AI adoption, combined with continued growth in cloud computing and digital services, is expected to nearly triple India’s built data centre capacity from 1.6 GW in 2025 to nearly 5 GW by 2030. Developers currently have an active pipeline of more than 3 GW, including around 1 GW of dedicated AI data centre capacity. According to the report, this expansion would require capital investments of nearly USD 25 billion over the next five years. Mumbai is expected to remain the country’s largest data centre hub, accounting for almost half of India’s installed and upcoming capacity during the period. A key theme emerging from the report is the growing importance of GPU infrastructure within India’s data centre ecosystem. Avendus noted that at current capital expenditure and pricing levels, large-scale GPU deployments could generate equity internal rates of return (IRRs) exceeding 28% on a hold-to-maturity basis. “AI adoption is emerging as a significant catalyst for next-generation infrastructure investments in data centers, alongside sustained demand from cloud and digital workloads,” said Vaibhav Garg, Director, Infrastructure & Real Assets Investment Banking at Avendus Capital and chief author of the report. “This dual demand trajectory has already translated into USD 5 billion of transaction activity over the last three years, with backing from global institutional investors, infrastructure funds, and strategic operators,” he added. Garg further said the firm expects public markets and strategic transactions to play a larger role in financing the sector’s next phase of growth, with three to four data centre-related initial public offerings (IPOs) likely over the next three years. The report also pointed to rising investor interest in the sector globally, noting that data centre transactions are currently taking place at EBITDA multiples of 20x–30x. It added that structures such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are increasingly being explored for capital recycling due to the sector’s stable cash flow profile and long-term contracts. India’s broader AI market is projected to grow from USD 13 billion in 2025 to USD 131 billion by 2032, representing a CAGR of nearly 39%, according to the report. The growth is expected to be supported by enterprise AI adoption as well as investments in domestic AI capabilities, including indigenous large language models (LLMs). The report also noted that more than 38,000 GPUs have already been committed under the IndiaAI Mission, with over 22,000 allocated specifically for AI workloads and expected to be deployed in the near term. This surge in GPU demand is expected to accelerate the need for high-density, liquid-cooled, AI-ready data centre infrastructure across the country.