View: Meta's cloud play will spice up Ambani-Adani rivalry

With Mark Zuckerberg promising to pour hundreds of billions of dollars into AI infrastructure, skeptics wondered how his social-media empire would ever monetize that expensive bet. We now have a plausible answer. Meta Platforms Inc. is turning a capital-expenditure drag into a new revenue source.

An internal initiative dubbed “Meta Compute” plans to lease out excess capacity to enterprise clients, Bloomberg News reported last week, citing people familiar with the matter. It remains to be seen what kind of a dent it can make in the domination of the ruling trinity of Microsoft Corp., Alphabet Inc., and Amazon. com Inc. over the cloud business. But to see where some of the early tremors will be felt, look to India.

Also Read: Meta partners with Reliance to set up its first data centre in India


Zuckerberg’s entry into the cloud-capacity game is about to fundamentally reshape the fierce rivalry between two of Asia’s richest tycoons, Mukesh Ambani and Gautam Adani.

Until recently, Adani looked like he was pulling ahead in the AI infrastructure craze gripping India. He has been aggressively building out hyperscale server farms, securing a prized partnership to provide infrastructure for Google. For a billionaire who specializes in ports, airports, and power grids, moving into the concrete and cooling systems of data centers seemed a natural progression.

But those plans collide with Ambani’s ambitions. If digital real estate is an obvious focus of expansion for Adani’s infrastructure empire, AI for individual and enterprise customers is equally crucial for the Ambani flagship Reliance Industries Ltd. The conglomerate wants to send Jio Platforms Ltd., its 10-year-old telecom and media unit, into public markets with a technology spin. (Meta bought 9.99% of Jio in 2020. )

Neither Ambani nor Adani has a presence in software outsourcing. And that’s a good thing — for them. The arrival of generative AI has upended the economics of India’s No. 1 services export. The country’s calling card is no longer its technically trained, English-speaking youth willing to work for a fraction of Western programmers’ pay. The advantage now lies with capitalists harnessing solar and wind power to produce AI tokens on the cheap.

The software hub of Bengaluru in the south is now where Meta’s engineers are building their proprietary silicon, while Gujarat on the west coast takes the lead in generating power for the token factories. That’s where Adani has put up the world’s largest single-location clean-energy project as part of a $100 billion AI compute push. Now Ambani is upping the ante with a 550,000-acre facility, three times the size of Singapore. When complete, it will be one of the lowest-cost sources of round-the-clock green power anywhere in the world, the group claims.

Also Read: Meta makes a $900 million super-app move in India

A customer for the energy has already arrived. Last month, Ambani announced a partnership with Meta to establish a 168-megawatt data center at Jamnagar in Gujarat. On paper, it looks like a standard infrastructure lease. However, for India’s corporate sector that will ultimately pay for the compute, the real allure comes down to data sovereignty.

In highly regulated industries like banking, insurance, telecom, health care, and defense, the cloud was a compliance minefield even before the arrival of AI. Moving sensitive customer information onto the US-centric public clouds of Amazon, Google, or Microsoft often invites intense regulatory scrutiny over where data is stored and who has access to it.

That’s where the Reliance-Meta alliance may alter the competitive landscape. Potentially, a Mumbai-based bank can finetune an open-weight model — and automate its credit underwriting by tapping servers in Jamnagar — without a single byte of personal financial data crossing the national border. The AI engine and the sensitive enterprise data feeding it remain firmly on Indian soil, and under the control of Reliance Enterprise Intelligence Ltd., in which the local conglomerate holds 70% equity and Meta owns 30%.

The triumvirate of Amazon’s AWS, Microsoft’s Azure, and Google Cloud built their empires on general-purpose enterprise storage. While Meta may have no interest in hosting a company's payroll software, there are other pathways to drumming up enterprise demand. Zuckerberg recently hired an Indian fintech leader to run WhatsApp globally. He wants to extend his dominance of the country’s social-media landscape into online commerce and payments. India already has developers with experience in building chatbots with Llama. Next up is Muse Spark. The proprietary AI engine purpose-built by Meta to handle conversational commerce may be just the tool for local firms to run digital storefronts.

Neither Ambani, 69, nor his rival, five years his junior, appears keen to take the kind of multi-billion-dollar, high-risk moonshot bets required to build foundational AI models from scratch. That’s a capital-intensive game they are content to leave to Silicon Valley and China. In the global division of AI labor, Indian conglomerates would rather build the launchpads than their own rockets.

Adani remains a formidable player, especially with Google as his strategic partner. Alongside solar and wind, the tycoon also has big plans for nuclear power, a state monopoly that has recently been opened to the private sector. That could be another arrow in his quiver to bring down the cost of tokens providing the uninterrupted baseload power required to run AI queries around the clock.

Still, the Meta-Reliance tie-up has raised the bar for competition. For Zuckerberg, India is the perfect laboratory to prove that Meta can succeed in enterprise cloud. And for Ambani, it’s yet another demonstration that in the theater of Indian capitalism, his mastery of alliances is what makes him a major actor.

Disclaimer: The views and opinions expressed in this article are the author’s own and do not necessarily reflect the official stance of The Economic Times.