Sam Altman, CEO of OpenAI, stated that India has emerged as the second-largest market for the company, with its user base tripling in the past year, reflecting the country's increasing importance in OpenAI's global expansion

ChatGPT developer OpenAI is gearing up to establish its first data center operations in India. Reports indicate that the company is currently in discussions with data center operators, marking the initial steps of its expansion plan. This move is designed to meet the growing demand for OpenAI's services in India and neighboring countries, with plans to store data for Indian users and those from smaller regional markets.

The company aims to complete the process by 2025, although exact timelines remain uncertain. Currently, OpenAI's infrastructure relies heavily on data centers located in Texas, USA. However, the rising demand for AI services in India, coupled with its large user base, has prompted the company to consider local operations. According to OpenAI CEO Sam Altman, India is now the second-largest market for OpenAI, with a tripling of its user base over the past year, underscoring the country’s importance in the company’s global strategy.

Rising competition and legal challenges in India

As OpenAI moves forward with its data center plans, it faces intensified competition from new players in the AI space. Chinese company DeepSeek has launched its own reasoning models, challenging OpenAI's dominance in the market. In response, Indian AI firm Krutrim has deployed DeepSeek’s latest AI models on Nvidia’s H100 graphics processors, further intensifying the competition. Meanwhile, the Indian government has decided to host DeepSeek's operations on local servers, addressing concerns about data privacy and compliance.

In addition to increasing competition, OpenAI is also embroiled in a legal dispute with Indian publishers. The company recently informed the Delhi High Court that it does not use Indian media content to train its AI chatbot, ChatGPT. This legal development highlights the ongoing regulatory challenges tech giants face in India, particularly regarding data usage and intellectual property rights.

During a recent visit to India, Sam Altman expressed optimism about the country’s role in the global AI revolution. He noted that India’s growing AI infrastructure, coupled with significant investments from both the public and private sectors, could position the country as a leader in AI technology. Altman also sought to clarify previous remarks regarding the costs associated with training large AI models, a statement that had created some controversy in 2023.

India becoming a key hub for AI investments

India’s growing importance as an AI hub is driving significant global investment in local data center infrastructure. Companies like Amazon Web Services (AWS) and Microsoft have already made major moves in the country, with AWS committing Rs 60,000 crore ($7 billion) to build data centers in Telangana. Microsoft, too, has expanded its presence by acquiring 48 acres of land in Hyderabad to bolster its data center operations. These moves highlight India’s increasing role as a critical market for AI and cloud services.

OpenAI’s decision to establish a local presence further cements India’s position in the global AI ecosystem. As AI adoption accelerates in the country, more global players are likely to follow suit, investing in local infrastructure to meet the surging demand. With data privacy and regulatory compliance top of mind, OpenAI’s efforts to set up its own data centers reflect a broader trend of tech companies seeking to localize their operations in India while tapping into the country's vast AI potential.