Avendus Capital says AI data centre capacity race is accelerating in India

India’s data centre industry is entering a new phase where artificial intelligence is becoming the biggest growth driver. According to Avendus Capital’s latest report, rising AI adoption could lead to the deployment of 650,000 to 700,000 GPUs across Indian data centres over the next five years, creating a USD 23 billion investment opportunity.

The report suggests that AI data centre capacity in India is no longer a future concept. It is quickly turning into core infrastructure for cloud computing, enterprise AI workloads, and digital services. India’s total built data centre capacity is expected to grow from 1.6 GW in 2025 to nearly 5 GW by 2030, reflecting a strong 26% CAGR.

This growth is being driven by two parallel shifts. First, enterprises are rapidly adopting AI-driven systems. Second, cloud and digital consumption continue expanding across industries.

GPUs are becoming the new infrastructure asset

One of the biggest insights from the report is the rising importance of GPU infrastructure inside India’s data centre ecosystem. Avendus noted that large-scale GPU deployments can generate equity IRRs of over 28%, making them one of the highest-return segments in digital infrastructure today.

The IndiaAI Mission GPU allocation is also adding momentum. More than 38,000 GPUs have already been committed under the mission, with over 22,000 expected to support AI workloads in the near term. This is increasing demand for high-density, liquid-cooled, AI-ready infrastructure across the country.

The report points to a growing shift where data centres are no longer just storage and compute facilities. They are becoming strategic AI infrastructure layers supporting enterprise innovation and large-scale automation.

Mumbai continues to dominate the hyperscale market

The Mumbai hyperscale data centre market is expected to remain India’s largest hub over the next five years. The city could contribute nearly half of the country’s installed and upcoming data centre capacity, supported by strong connectivity, enterprise demand, and infrastructure investments.

Developers currently have an active pipeline of more than 3 GW, including nearly 1 GW dedicated to AI workloads. Together, these projects may require close to USD 25 billion in capital investment over the next five years.

The report also highlights increasing investor interest. Global institutional investors, infrastructure funds, and strategic operators have already driven nearly USD 5 billion in transaction activity over the past three years.

Infrastructure pressure is becoming the next challenge

As AI infrastructure expands, operational complexity is also growing. High-density AI facilities require advanced cooling systems, an uninterrupted energy supply, and stronger infrastructure planning. Concerns around Data center power grid constraints in India are becoming more relevant as developers scale AI-ready capacity rapidly.

At the same time, public markets, REITs, and InvITs are emerging as possible funding routes for future expansion, especially as long-term contracts and stable cash flows make the sector attractive to investors.

Conclusion

India’s AI ambitions are now directly tied to infrastructure readiness. The latest Avendus Capital report shows that AI data centre capacity is becoming one of the country’s most critical digital growth areas. As AI adoption accelerates, the real competition may no longer be about applications alone, but about who can build and scale the infrastructure powering the AI economy fastest.

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