Microsoft sets eyes on India with $3 billion investment in cloud and AI

Microsoft has kicked off the year in India with plans to grow its revenue. The firm plans to invest $3 billion to expand its cloud Azure and AI services in the country with the world’s largest population. 

Satya Narayana Nadella, the CEO of Microsoft announced that the company will also train an additional 10 million people in the country to use AI. 

Satya Nadella stated, “The investments in infrastructure and skilling we are announcing today reaffirm our commitment to making India AI-first, and will help ensure people and organizations across the country benefit broadly[…]The diffusion rate of AI in India is exciting.”

It was indeed a delight to meet you, @satyanadella! Glad to know about Microsoft's ambitious expansion and investment plans in India. It was also wonderful discussing various aspects of tech, innovation and AI in our meeting. https://t.co/ArK8DJYBhK

— Narendra Modi (@narendramodi) January 6, 2025

Microsoft has also announced the signing of an AI memorandum of understanding with SaaSBoomi, a community for B2B entrepreneurs in India. The two will collaborate to encourage entrepreneurship in smaller Indian cities and towns and to garner an additional $1.5 billion in VC funding for Indian AI and SaaS startups.

Microsoft is already doing well in India. Notably, the firm has been operating in India for more than two decades. Some of its clients in India include Infosys, Air India, Meesho, Tech Mahindra, Federal Bank, Apollo, MakeMyTrip, HCL Tech, Manipal, Icertis, and InMobi. 

According to Nadella, IT firm Persistent is implementing Microsoft 365 Copilot’s “Contract Assist” to decrease the duration of negotiations by 70%.

India as an AI market

India is a crucial overseas market for American IT titans. Several of them have invested tens of billions of dollars in developing and scaling their operations in the South Asian market over the last two decades. This is to court enterprises serving hundreds of millions of consumers.

In fact, in recent quarters, competition among hyperscalers has heated up as Microsoft aggressively expands its products with new AI capabilities. For instance, Amazon announced in 2023 that it would invest $12.7 billion in its India operations by 2030.

Additionally, India has also solidified its position on the global stage as one of the world’s largest and fastest-growing developer marketplaces. More than 17 million people in India use Microsoft’s GitHub. Several industry executives, including Nvidia CEO Jensen Huang and AMD CEO Lisa Su, have visited India in recent months. Their trips have primarily been to attract developers.

Microsoft, one of India’s leading cloud and AI providers, already operates three data center locations in the country. According to the firm, it expects to launch a fourth next year. The $3 billion investment would go toward creating a scalable AI computer environment to support India’s AI businesses and research community. The move is expected to increase the firm’s popularity in the region.

Microsoft estimates investing $80 billion in AI-enabled data centers in 2025.

In fiscal 2025, Microsoft anticipates investing $80 billion in the development of data centers that can accommodate artificial intelligence workloads.

Microsoft $MSFT said today it expects to spend $80 Billion in fiscal 2025 on the construction of data centers that can handle AI workloads

Over half of Microsoft’s $80 billion in spending will take place in the United States 🇺🇸 – CNBC pic.twitter.com/AwWSr9fxMu

— Evan (@StockMKTNewz) January 3, 2025

Additionally, according to Microsoft Vice Chair and President Brad Smith, the US will account for more than half of the anticipated AI infrastructure expenditures. Notably, June will mark the conclusion of Microsoft’s fiscal year for 2025. 

This decision is influenced by the upcoming administration that will be led by Trump. Brad Smith said, “Today, the US leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises.”

Additionally, Smith challenged the President-elect’s administration to maintain the country’s AI leadership through education and the promotion of US AI technologies abroad. He said, “China is starting to offer developing countries subsidized access to scarce chips, and it’s promising to build local AI data centers […] The Chinese wisely recognize that if a country standardizes on China’s AI platform, it likely will continue to rely on that platform in the future.”

He added, “The best response for the United States is not to complain about the competition but to ensure we win the race ahead. This will require that we move quickly and effectively to promote American AI as a superior alternative.”

Meanwhile, in the first quarter of fiscal 2025, Microsoft reported a total of $20 billion in capital expenditures and assets acquired under finance leases worldwide. $14.9 billion went to property and equipment. In the fiscal first quarter, Microsoft’s revenue from Azure and other cloud services increased by 33%, with AI services contributing 12 percentage points.

Still, in fiscal 2025, Visible Alpha surveyed analysts anticipated a $63.2 billion increase in property and equipment acquisitions. This would represent a 42% year-over-year increase.

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