OpenAI has turned to the Tata Group, to leverage TCS's vast enterprise expertise and its recent foray into AI-ready data centres. India, home to the second-largest user base for ChatGPT after the US, represents a critical frontier for OpenAI's global expansion amid stringent data localisation mandates from the Indian government.

OpenAI is reportedly deep in negotiations with IT giant Tata Consultancy Services (TCS) to forge a strategic alliance focused on building cutting-edge AI infrastructure and co-developing advanced solutions for enterprises. The collaboration, if finalised, could mark the beginning of OpenAI's ambitious Stargate India initiative.

Why did OpenAI choose TCS?

Economic Times reports that the talks come on the heels of OpenAI's unsuccessful bid to partner with Reliance Industries earlier this year, where disagreements over commercial terms stalled progress. Undeterred, OpenAI has turned to the Tata Group, leveraging TCS's vast enterprise expertise and its recent foray into AI-ready data centers. India, home to the second-largest user base for ChatGPT after the US, represents a critical frontier for OpenAI's global expansion amid stringent data localisation mandates from the Indian government.

A senior industry observer noted the Tatas' cautious approach, "TCS is keen on broadening its AI offerings without diluting equity or pinning too much on a single partner like OpenAI." This strategy allows room for other players, such as Anthropic, to join as tenants in TCS's expanding infrastructure.

OpenAI, TCS to co-develop Agentic AI solutions

At the heart of the discussions is the co-development of 'agentic AI' solutions - autonomous AI agents capable of executing complex tasks with minimal human intervention. These would be powered by OpenAI's frontier GPT large language models (LLMs) and integrated into TCS's delivery models for end-to-end enterprise applications. Target sectors include banking, financial services, and insurance (BFSI), retail, consumer goods, and manufacturing, where AI could streamline operations, enhance decision-making, and drive innovation.

The partnership envisions OpenAI as the anchor tenant in TCS's HyperVault data centers, leasing at least 500 MW of capacity to train and deploy AI models locally. This setup ensures compliance with India's data residency rules while reducing latency for real-time applications. No equity infusion from OpenAI into HyperVault is on the table, preserving TCS's control.

Infrastructure push: Billions in investments

Underpinning the deal is TCS's aggressive infrastructure buildout. The company recently teamed up with global investment firm TPG to pump up to Rs. 18,000 crore ($2.1 billion) into HyperVault, aiming to create gigawatt-scale, AI-optimised facilities over the next few years. Total capital expenditure for the project is estimated at $6.5-7 billion, positioning HyperVault as a powerhouse for sovereign AI compute in India.

"This investment will support HyperVault’s GW-scale AI-ready infrastructure build and aligns with TCS’ plan to create AI-ready data centres with capacity in excess of a GW over the next few years," a TCS statement highlighted.

Google has also seen the scope of this and has announced a $15 billion commitment to an AI hub in Andhra Pradesh.

Implications for India's AI Landscape

Should the talks culminate in a deal, the alliance could accelerate India's AI market, projected to surge 25-35 percent annually to $17-22 billion by 2027.

A new report by AWS indicates that Agentic AI expected to play a central role in how decisions flow across manufacturing environments. The report says that 75 percent of manufacturers expect AI to be a top three margin driver by 2026. Nearly three-fourths of leaders anticipate AI agents managing up to half of routine production decisions within the next three years, signaling a shift toward self-optimising workflows.