Google to spend $15 billion on AI data center in biggest India investment

• Google raises bets on its key growth market of India

• New data center to come up in southern port city

• Alphabet faces challenges in big YouTube, Android market

• Google data center to generate 188,000 jobs

Bengaluru - Google said on Tuesday it would invest $15 billion over five years to set up an artificial intelligence data center in India's southern state of Andhra Pradesh, its biggest ever investment in the world's most populous nation.

The U.S. tech giant's plan comes amid a tense diplomatic standoff between New Delhi and Washington over tariffs and a stalled trade deal, as Prime Minister Narendra Modi has urged a boycott of foreign goods.

Indian infotech and finance ministers attended the New Delhi event at which Google Cloud CEO Thomas Kurian said the data centre in Andhra Pradesh would be the company's "largest AI hub" outside the United States.

"This long-term vision we have is to accelerate India's own AI mission," Kurian said.

Google has committed to spending about $85 billion this year to build out data centre capacity as big tech companies invest heavily to build new infrastructure in their competition to meet booming demand for AI services.

The data centre campus in the port city of Visakhapatnam will have an initial capacity of 1 Gigawatt.

US-India tension

U.S.-based multinationals face growing boycott calls in India, as business executives and Modi supporters have stoked anti-American sentiment to protest against the tariff of 50% on imported Indian goods.

"This initiative creates substantial economic and societal opportunities for both India and the United States," Google said in a statement, without referring to the tariffs.

In recent weeks, Indian officials have privately met many executives of U.S. companies to say they are committed to providing an easy business environment despite the discontent over U.S. tariffs, two sources told Reuters on condition of anonymity.

A billion internet users 

Microsoft and Amazon have already poured billions into building data centres in India, a critical growth market where nearly a billion users access the internet.

Indian billionaires Gautam Adani and Mukesh Ambani have also unveiled investments in building capacity for data centres.

Adani Group and India's Airtel have partnered with Google to build the infrastructure for its new project, which also includes construction of a new international subsea gateway.

AI requires enormous computing power, pushing demand for specialised data centres that enable tech companies to link thousands of chips together in clusters.

Earlier, state officials had estimated the investment at $10 billion for the centre, which they said would generate 188,000 jobs.

Google parent Alphabet Inc GOOGL.O counts India as a key growth market where its YouTube video services has most users, and Android phones dominate smartphone usage.

However, the U.S. firm has been battling many antitrust challenges in India over its business practices, and also faces a lawsuit from a Bollywood couple challenging YouTube's AI policy.

(Reporting by Munsif Vengattil in Bengaluru and Sarita Chaganti Singh; Editing by Lincoln Feast and Clarence Fernandez)