Whalesbook
PwC projects India’s data centre sector could grow into a $280 billion market by 2035, driven by an eightfold expansion in capacity to 13.8 GW. While this AI-led growth creates demand for IT infrastructure and cooling systems, investors should note risks related to import dependency and supply chain stability.
What Happened
Consulting firm PwC has released a report projecting that India’s data centre market is poised to reach a $280 billion order book by 2035. This growth is primarily expected to be fueled by the rapid adoption of artificial intelligence (AI) and the ongoing digital transformation across the Indian economy. The report estimates that direct investment into core data centre infrastructure will reach approximately $71.6 billion over this period, highlighting a massive push in capital spending for the sector.
The Shift in Capacity
India’s currently installed data centre capacity sits at roughly 1.6 gigawatts (GW). The industry is now looking at a significant scale-up, with expectations to reach 13.8 GW by 2035—an eightfold increase. This expansion is essential to meet the high-density power and processing demands of modern AI workloads, which require significantly more computing power than traditional enterprise applications.
Where the Capex Will Go
Capital expenditure in this sector is heavily skewed toward hardware and specialized infrastructure. PwC forecasts that IT equipment—such as high-end servers, networking gear, and essential chips—will dominate, accounting for 65% to 75% of total capital spending. This segment alone is estimated to create opportunities valued between $180 billion and $210 billion. Additionally, the need for specialized electrical infrastructure and advanced cooling systems is expected to see combined order books reaching between $33 billion and $46 billion.
The Cooling Technology Evolution
AI workloads are generating intense heat, making traditional cooling methods inefficient. The sector is moving rapidly toward high-performance solutions, such as direct liquid-to-chip cooling and immersion-based cooling systems. These technologies are becoming critical for hyperscale and AI-ready data centres. For investors, this shift indicates that the suppliers of these specialized cooling systems are likely to capture a growing share of the infrastructure spend.
Risks and Supply Chain Concerns
Despite the optimistic outlook, the data centre sector faces clear challenges. A significant risk is the heavy reliance on imports for mechanical, electrical, and plumbing (MEP) components. These parts are often 'long-lead' items, meaning they take a long time to procure, making projects vulnerable to global supply chain disruptions and geopolitical instability. Furthermore, the industry remains dependent on global original equipment manufacturers (OEMs) for critical after-sales support and spare parts. Any delay in these supply chains could lead to project execution delays or cost overruns for data centre operators.
What Investors Should Track
Investors may want to monitor several key factors as this sector evolves. First, watch for progress on potential government initiatives, such as a dedicated Production-Linked Incentive (PLI) scheme for data centre equipment, which could reduce import dependency. Second, track the speed at which domestic manufacturing clusters under the 'Make in India' initiative can produce critical infrastructure components. Finally, monitor the execution timelines of major hyperscale projects and the ability of companies to secure steady, cost-effective power, which remains a core requirement for operating these massive facilities.