TCS bets big on AI infrastructure with TPG-backed data centre JV
With a 1-GW buildout and global rollout plan, Tata’s tech arm eyes new revenue streams and a stronger footprint in the AI era
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Bengaluru: TCS’ move to rope in global private equity firm, TPG for launching its data centre business indicates the Tata Group company’s global ambition in the emerging space. According to industry experts, TCS is pursing another revenue source from its data centre business, prospects of which are rising in the current artificial intelligence era.
“It’s a wise move to get reputed PE firm on board as the idea seems to expand data centre business globally. Big tech firms like Meta haveraised capital from PE firms for its data centre business. At some point of time, TCS can also look at hiving off this business as a separate entity if it scales up well,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting, told Bizz Buzz.
“The advantage of TCS is that it is part of Tata Group, which has multiple companies under its umbrella. The group companies execute multiple projects across the spectrum including the government ones. So, TCS is testing the new business in India, which it will take to the world,” he added.
Last week, TCS and TPG had announced that it would form a joint venture to develop AI data centres. As part of the agreement, both partners set to invest around $2.03 billion) in equity.
The capital will be invested in tranches in the JV, called HyperVault AI Data Centre, over the next few years, TCS has said.
During the second quarter earnings announcement, TCS has TCS has unveiled a plan to develop data centres of 1 gigawatt capacity as part of its AI-related business initiatives. The company is likely to invest around $7 billion in the next fiveto seven years for development of these data centres.
As demand for sovereign cloud is going to increase with rising AI wave across the world, TCS maysee better business prospects for data centre business.
Traditionally conservative in the acquisition space, TCS also announced acquired US-basedListEngage for $72.8 million, making it the first after more than a decade.
“The investment amountrequired for data centre is not high, which TCS can’t manage on its own. However, the company preferred to rope in a PE partner shows that it is taking measured risk in this new line of business without upsetting shareholders, who may ask questions on returns achieved from such investments,” said a source.
Meanwhile, foray into data centre business is likely to support TCS’ positioning as a full-stack player in the AI era.
