The following piece is part of the U.S.-India AI Fellowship Program’s short-form series.
The growing competition among nations and big-tech firms in generative Artificial Intelligence (AI) capabilities is leading to exponential growth in the demand for computing power (often referred to as ‘compute’ for short). Such growing demand increases the need for cloud platforms for data access, data centers to store and manage data, and talent to design, manage, and utilize the infrastructure.
As AI becomes a foundational determinant of economic leadership, military superiority, and global influence, the United States is actively recalibrating its policies, investments, and alliances to maintain dominance. However, certain concerns regarding cost and resources limit Washington’s ambitions. First, with rapid AI adoption, the overall cost of managing data centers in the United States has grown. The demand for power and capital expenditure has surged, leading to utility rate hikes. A survey revealed that 60% of organizations experienced rising cloud costs, driven by inflation and AI adoption. Second, with a surge in demand for AI engineers, the United States is not among the top countries with regard to AI talent concentration. Third, a McKinsey report points to a U.S. supply deficit of 15GW by 2030. Research estimates suggest that in less than a quarter of the time, at least twice the number of data centers need to be constructed compared to those built in the last 25 years. Where and how these data centers are being operated is critical to address the global demand capacity crunch.
To address these limitations, forging international partnerships in developing data center clusters, talent development, and infrastructure expansion is critical. India, with its cost-effective digital infrastructure, robust engineering talent pool, and growing compute ambitions, emerges as a natural partner for the United States. Efforts to boost bilateral cooperation between the United States and India must view AI compute infrastructure (including data, data center infrastructure, and talent) not as a peripheral asset, but as a central pillar of collaboration in the critical and emerging technologies domain. In fact, existing frameworks between the two nations, particularly the U.S.-India TRUST initiative, must be leveraged further toward twin objectives: i) build modern and cost-efficient data centers, and ii) enhance talent capabilities to innovate with advanced AI algorithms and to manage modern AI infrastructure.
India’s Data Center Industry: Growth potential amid structural limits
Two key strengths in India’s AI landscape should drive and deepen this cooperation. First, India is primed for the development of vertical, sector-specific AI solutions owing to its robust IT services industry. Second, unlike China, where geopolitical tensions led U.S. firms like OpenAI to opt out, leveraging India’s democratic data landscape offers opportunities for inclusive AI development.
However, with high volume, not all data is structured, clean, labeled, and machine-readable. Additionally, interconnected concerns related to cost, compliance, and operational flexibility remain persistent, despite several rounds of deliberations on India’s data protection regime. Given such complexity, India’s compute strategy must strike a careful balance: addressing domestic requirements and infrastructure constraints while opening markets to American hyperscalers. The solution lies in reinforcing partnerships with these hyperscalers to co-develop sovereign policy frameworks and robust, secure standards.
Second, India’s rising AI talent could emerge as a force multiplier for the United States. Outside of the United States and China, India’s AI workforce could emerge as the largest. According to a Stanford report, India recorded the world’s highest year-on-year growth in AI hiring at 33.4% in 2024. The report also noted India’s growth in AI skill penetration between 2015 and 2024, with a score of 2.51, second only to the United States. The country was ahead of Europe in AI-related contributions to GitHub projects in 2024, and just behind the United States. Reporting on future prospects, Nasscom and BCG noted that India’s AI services could be worth US$17 billion by 2027. However, persistent concerns around scalability, outdated training, and lagging skillset continue to hinder innovation.
Further, India’s capability to emerge as a data center hinges on its ability to manage its energy needs. Smooth operation of data centers depends on reliable power supply, high-bandwidth connectivity, and cooling infrastructure. As of April 2025, India's total installed data centre capacity stood at 1,263 MW and is projected to exceed 4,500 MW by 2030, representing a 3.6 times increase from 2020 levels — fueled largely by AI, cloud, and digitization trends. ICRA forecasts that India’s data center capacity will reach 2,000–2,100 MW by March 2027, up from approximately 1,150 MW at the end of 2024. With rising demand, concerns related to high energy intensity, reliable power supply, and the need for green, sustainable infrastructure must urgently be addressed by policymakers.
A Bilateral Blueprint for Collaboration
Given these challenges, collaboration between India and the United States in the AI compute domain must be informed by an underlying reality: power in this era will be shaped as much by values and cooperation as by processing speed. As China rapidly scales its AI capabilities to challenge American technological primacy, India offers Washington a democratic and data-rich base to leverage. This is crucial to support the U.S. bet on maintaining a significant technological lead over China, which is actively building data centers in Global South nations — especially through the outward expansion of its big tech enterprises, such as Huawei, Alibaba, and Baidu — as part of its flagship infrastructure project, the Belt and Road Initiative (BRI). Huawei alone invests US$140 million annually in building data centers. Any American strategy to influence technology infrastructure in the Global South may not leave a critical node behind — India. Additionally, in the long term, India’s emergence as a hub of ‘compute-as-a-service’ will also enhance its future position as a leader in the Global South.
A few key priorities emerge for India and the United States to streamline their ongoing efforts to boost cooperation in high-tech areas. India must prioritize strengthening its academic and research collaborations with the United States. First, cross-country research collaboration is central to training the AI workforce. Indian institutions have already tied up with research institutes in Taiwan, Belgium, and Singapore to augment the skills of thousands of Indian engineers. By leveraging the talks under the TRUST initiative, India should forge similar ties with American research institutions. Of specific importance are industry bodies like Semiconductor Equipment Manufacturing International and the Semiconductor Industry Association, which are driving American upskilling efforts. India must leverage this opportunity to train its own AI force. Additionally, by collaborating with such institutions, not only would India’s semiconductor mission receive wider exposure, but it could also help develop compatibility with global standards to support domestic policies. Furthermore, to enhance academia-to-academia collaborations with the United States, India should seek more Memorandum of Understanding (MOUs) like one with Purdue University.
Second, a significant boost in bilateral cooperation in high-tech sectors requires shared protocols and governance norms. A robust framework for bilateral technology transfer will be essential to ensure long-term cooperation in high-tech areas. India should expand joint cooperation under the proposed U.S.-India Roadmap on Accelerating AI Infrastructure to develop a national electric grid, co-invest in edge data centers, and facilitate access to advanced cooling technologies. The success of the TRUST Initiative fundamentally depends on whether India and the United States can effectively coordinate their domestic industrial strategies.
Megha Shrivastava is part of the U.S.-India AI Fellowship Program at ORF America. She is currently a Doctoral Research Scholar and Dr. TMA Pai Fellow for the Department of Geopolitics and International Relations at the Manipal Academy of Higher Education.