BREAKINGVIEWS-India will be an endurance test for AI giants

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Ujjaini Dutta

BENGALURU, Feb 4 (Reuters Breakingviews) - Artificial intelligence giants should brace for a lengthy showdown in India. OpenAI and peers are pushing cheap plans at individuals and courting firms in the world's most populous country. With over 800 million internet users and plenty of data, the market is a tantalising prize. But prying open corporate budgets and consumer wallets will be a slog.

OpenAI in August launched a subscription plan for ChatGPT at 399 rupees a month, or just $4.50 - a fraction of the average $20 monthly subscription cost in the United States - with the first year free from November. Alphabet's Google GOOGL.O teamed up with India's largest telecoms provider, Reliance Jio, months later to offer its 500 million plus users bargain prices to access the U.S. titan's Gemini AI models, charging nothing for the first 18 months - similar to Perplexity's tie-up with Bharti Airtel BRTI.NS.

India is now OpenAI's second-largest market by users after the United States; Sam Altman recently predicted it may soon become its biggest. The OpenAI boss will make his second visit to India in about a year in February, according to TechCrunch, citing sources. That will coincide with a tech summit in New Delhi where Google CEO Sundar Pichai, Nvidia's NVDA.O Jensen Huang and other executives are due to appear. Besides India's vast online population, second after China, the country also offers AI labs troves of multilingual data to train models plus a deep talent pool of software engineers and developers.

OpenAI projects 220 million users globally will pay for ChatGPT by 2030, according to The Information, citing sources. Assume a tenth of those subscribers are in India - roughly the same estimated share as ChatGPT's India users as a percentage of the total - that implies annualised sales of only $1.2 billion on the South Asian country's current subscription offers. That's a small part of OpenAI's total annualised revenue, which topped $20 billion last year.

Raising prices for Indian consumers in the near term looks tough given the intensifying competition. To generate more revenue, it will be crucial to tap enterprise customers - a departure from the United States, where the company still relies on consumers for most of its sales. But in India - and across Asia - traditional cloud computing giants like Microsoft MSFT.O and Amazon.com AMZN.O are established and are planningambitious expansion plans. Moreover, even though companies are embracing AI, more than 95% of Indian firms surveyed by EY allocate less than a fifth of their IT budgets to AI.

In a sign of how crucial courting Indian companies will be, Anthropic, which owns the popular Claude coding agent, last month appointed a former Microsoft India executive who had "led enterprise AI adoption" as head of its Bengaluru office. The battle for India is just getting underway.

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CONTEXT NEWS

OpenAI CEO Sam Altman is planning to visit India in mid-February, his first visit to the country in nearly a year, TechCrunch reported on January 23, citing sources. The visit coincides with the country's inaugural India AI Impact Summit in New Delhi that will run between February 16 and 20.

In October, Google offered its $400 Gemini AI Pro subscription for free for 18 months to 500 million customers of Reliance Jio, India's biggest telecom player. OpenAI began offering its ChatGPT Go subscription free to users in India for one year starting November 4.

(Editing by Robyn Mak; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on DUTTA/ujjaini.dutta@thomsonreuters.com))