India and the Global AI Bubble: The Hidden Ripple Effects

The global AI boom is being powered by an enormous U.S.-centric capex surge in data centers, GPUs and cloud infrastructure. This spending—largely from Big Tech—is now responsible for roughly 40% of U.S. GDP growth, masking weak consumer demand and fragile manufacturing. The structure of this boom resembles a classic bubble: heavy leverage, rapid GPU depreciation, circular financing between hyperscalers, cloud providers and AI labs, and a revenue model that still falls far short of the trillions needed to justify today’s infrastructure buildout. If demand fails to catch up, the ecosystem faces a domino risk—defaults at neoclouds, stranded data centers, write-offs by lenders and a contraction in capex, potentially triggering wider economic stress. India is not at the center of this bubble, but it is tightly connected to its value chain. The country is undergoing a massive data center expansion, led by players like AdaniConneX, Sify, Nxtra and Tata Communications. These projects depend heavily on global hyperscalers whose own AI spending may slow if the bubble unwinds. A correction would impact industrial REITs, power producers like

C, Tata Power and JSW Energy, and infrastructure lenders such as REC, PFC and major banks. India’s IT services giants— , Infosys, Wipro, Tech—are also exposed, as U.S. clients drive most AI transformation spending. While India is safer due to lower leverage and more diversified demand, a sharp global AI slowdown would still cool its data center pipeline, ease power-demand projections and soften IT growth. The bubble’s benefits are real, but so are the risks if global capex loses steam.