By: Medha Prasanna
Hyperscale data centers are becoming the critical backbone of the digital economy. These facilities, designed to host tens of thousands of servers with power capacities exceeding 40 MW, are essential for the Artificial Intelligence (AI) revolution now underway. Unlike conventional data centers, hyperscale facilities are custom-engineered to manage vast workloads, distribute computing seamlessly, and minimize latency across networks. Their scale matters: while cloud computing racks typically require on average 5-10 kW, AI workloads could demand far more — between 30-100 kW per rack. In this sense, hyperscale is not simply a technological category, but describes the very infrastructure underpinning the age of AI.
The United States has already experienced a hyperscale boom, more than doubling the number and size of such facilities between 2020 and 2025. India is only beginning this journey. Its data center market is on the cusp of explosive expansion, with projected annual power demand growth of nearly 28% over the next five years. This acceleration is being driven not just by rising demand for digital services and cloud computing, but also by the regulatory environment. The Digital Personal Data Protection Act of 2023 requires certain categories of data to be stored domestically, multiplying the need for storage and processing facilities. National recognition of data centers as “infrastructure” has eased permitting, and several states — including Karnataka, Uttar Pradesh, Tamil Nadu, and Maharashtra — are competing to attract investment with incentives around land, power supply, and finance. Yet these efforts are only the beginning. The specific demands of hyperscale development — reliable power, large parcels of land, and sustainable water access — remain formidable challenges for India to overcome.
Power is perhaps the most pressing. Globally, more than $200 billion of the trillion-dollar data center infrastructure pipeline between 2025 and 2030 is projected to go into electricity supply alone. In India, the increasing demand, renewable integration, and aging grid infrastructure, particularly in Tier 1 cities with data center clusters, are straining grids. The United States faces its own power bottlenecks. In Northern Virginia, home to the world’s largest concentration of data centers and global internet traffic, electricity demand is testing grid capacity. American hyperscalers have responded by investing directly in generation and transmission infrastructure. Google’s $3 billion investment in hydroelectric power in Pennsylvania and its partnership with PJM, the country’s largest transmission operator, are cases in point. In India too, new projects are beginning to link data center expansion with investments in renewable energy. Google’s planned $6 billion hyperscale facility in Visakhapatnam includes $2 billion earmarked for renewables — a model India would do well to replicate widely if it is to reconcile digital growth with energy security.
Land acquisition presents a second layer of difficulty. In India, complex regulations around land acquisition and zoning, and soaring costs are seen as impediments to data center development. This is especially true in cities like Mumbai, Delhi, and Bangalore with concentrations of businesses and data centers. In the United States, similar constraints in northern Virginia are driving a shift toward more remote states with cheaper real estate and friendlier permitting. That transition is not without its own social and environmental controversies, but U.S. firms have responded with proactive community engagement and local hiring to build trust. Indian states could adapt similar models, while also streamlining acquisition processes and encouraging development in emerging urban centers where land and connectivity are more accessible. The long-term success of hyperscale projects in both countries will depend on how effectively land availability can be balanced with local community needs.
Water is the third critical constraint. Cooling millions of servers requires millions of gallons of water, a challenge in regions already facing scarcity. In India, data center-friendly states such as Andhra Pradesh, Karnataka, and Delhi face water shortages. In the United States, Arizona — now among the fastest growing hubs — faces similar risks. Technology giants like Microsoft, Google, and Amazon have pledged to become “water positive” by 2030, investing in replenishment projects to offset consumption. Yet with climate change accelerating shortages, the pressure to innovate is immediate. Both India and the United States must prioritize breakthroughs in water-efficient cooling systems, from advanced air-cooling to circular reuse technologies, to make hyperscale growth environmentally sustainable.
This convergence of challenges creates a unique opportunity for collaboration between India and the United States. American firms excel in accelerating innovations and deploying at scale, while India boasts a rapidly expanding digital market, competitive pricing, and a skilled tech workforce. This combination is powerful. Joint innovation in water-efficient cooling, collaborative investment in low-carbon hyperscale campuses, and harmonized approaches to land and community engagement could make the U.S.–India partnership a global benchmark in data infrastructure.
If India can navigate these hurdles, it could emerge as the data center hub of the Asia-Pacific region, anchoring its ambition to lead the AI age. For the United States, partnering with India is not only about accessing a vast market, but also about shaping global standards for the infrastructure of the future. The alternative — underinvestment, fragmented regulation, and unsustainable growth — would leave India dependent on others for its digital future, forfeiting its chance to lead in the AI era. For the United States, it would mean losing a strategic partner in shaping global norms for hyperscale development and ceding ground to competitors. The window of opportunity is narrow, but the potential is immense.
Medha Prasanna is a Program Coordinator and Junior Fellow for the Energy & Climate program at ORF America.