Microsoft’s new undersea cable bets India’s AI future on Southeast Asia

India’s data centre capacity is on pace to quintuple to roughly 7 gigawatts by 2030, Macquarie Equity Research projects, intensifying demand for new subsea cables. A consortium led by Microsoft and Lightstorm announced the I-2SEA cable on July 2, 2026, linking India to Malaysia and Singapore.

The 3,600-kilometre system won’t be operational until late 2029. Its real significance lies in the infrastructure race it serves — a buildout where AI and cloud capacity are remaking whose capital flows through Asian networks.

India’s data centre capacity is on course to reach roughly seven gigawatts by 2030, Macquarie Equity Research says. That five‑fold surge is the gravitational force reordering the region’s digital backbone. On July 2, a consortium led by Microsoft and Lightstorm announced the I‑2SEA submarine cable, a new link connecting India to Malaysia and Singapore and designed specifically for artificial-intelligence and hyperscale cloud traffic. The cable is the latest piece of plumbing for the ballooning demand. Its real significance, however, is the race it is built for — a race in which the finish line keeps moving.

One cable, 3,600 kilometres, and a seven‑gigawatt bet

India’s operational data centre capacity sits at about 1.4 gigawatts right now, Macquarie notes. Even projects already under construction will push that figure to roughly 2.8 GW by 2027, as hyperscale builds in Mumbai, Chennai, Hyderabad and Delhi come online.

If planned projects stay on schedule, capacity could hit roughly seven gigawatts by 2030 — a five‑fold leap that demands far more international fibre than the country’s 17 active submarine cables can handle. TeleGeography’s submarine cable map currently shows those systems topped out at a total potential capacity of about 960 terabits per second.

The I‑2SEA cable stretches 3,600 kilometres from a landing station in Machilipatnam, Andhra Pradesh, to Malaysia and Singapore. Lightstorm’s CEO Amajit Gupta has said the system is engineered for AI and hyperscale workloads and will expand his company’s connected cloud and AI zones in India from 19 to 29 once it is operational in the fourth quarter of 2029.

Alan Mauldin, research director at TeleGeography, has repeatedly noted that roughly 95 per cent of all international data traffic already travels over submarine cables. For a country betting its cloud future on multi-GW data centres, a new high‑capacity cable is not a luxury — it is the physical layer without which the data cannot move.

Undersea cables are bundles of glass fibre, each thinner than a human hair, that carry data as pulses of light. Signals travel thousands of kilometres with optical repeaters boosting strength roughly every 50 to 100 km. Using wavelength‑division multiplexing, a single fibre pair can move multiple terabits per second — capacity and latency that satellites cannot match. For AI training and real‑time cloud applications that must shuttle enormous datasets between data centres, this kind of link is not supplementary; it is indispensable.

A capital shift beneath the cable

The I‑2SEA cable is one node in a far wider transformation. Lightstorm itself plans to list in India by mid‑2027, reportedly targeting a valuation of up to US$1.5 billion. If that listing proceeds on schedule and at the expected price, it will be a signal that global capital is betting on India’s data‑infrastructure boom — and a mechanism to fund further cable and fibre build‑out. A delay or down‑round would raise immediate questions about construction timelines and competitive pressure.

The funding model has changed. Instead of relying solely on legacy carriers, hyperscalers are directly bankrolling the seabed. Google and Meta’s Apricot cable, now under construction, is another example of Big Tech’s determination to own the routes that carry its cloud traffic. In parallel, private‑equity‑backed players such as Lightstorm and its backer I Squared are betting that regional fibre and landing stations will generate utility‑style returns for decades.

India’s licensing framework — anchored in the 1885 Indian Telegraph Act and an ILD licence carrying security conditions — is similar in intent to the scrutiny the US Federal Communications Commission and Team Telecom apply to foreign cable ownership. Singapore’s IMDA imposes its own facilities‑based operator rules. What neither regime yet addresses in detail is the AI‑specific governance of data flowing through these pipes, leaving a regulatory gap that will grow as cables get built. For now, the race is physical: dig, lit, and connect before the other guy does. The scale of the data‑capacity buildout behind a single cable like I‑2SEA is already visible in the numbers — a trajectory that will define the region’s AI infrastructure for the next decade.

Beyond the headline

The Bigger Picture

I‑2SEA is one node in a much wider transformation: India’s evolution from a primarily domestic IT outsourcing hub into a regional data gravity centre for AI and cloud. As capacity expands from roughly 1.4 GW toward multi‑gigawatt scale, control over east‑west data routes through the Indian Ocean becomes a strategic asset on par with energy corridors, reshaping how workloads are distributed between Europe, the US and Asia and giving India leverage in future digital trade and data‑sharing negotiations.

The Money Trail

The cable underscores a shift in who bankrolls core internet infrastructure. Rather than relying only on legacy carriers, hyperscalers like Microsoft are directly funding subsea systems to protect their cloud economics — securing predictable bandwidth costs and routing flexibility for Azure. At the same time, private‑equity‑backed players such as Lightstorm and I Squared are betting that owning regional fibre and landing stations will generate utility‑like returns from data centre tenants, cloud providers and AI firms over decades, creating a new asset class of “digital infrastructure” investments.

The Reach

One underappreciated implication for Western stakeholders is how an India–Southeast Asia cable can quietly reroute the backbone of many everyday services. A single high‑capacity system like I‑2SEA lets Microsoft shift Azure traffic for European and North American clients through Indian and Singaporean data centres when economically or technically advantageous, altering where data is stored, processed and potentially regulated. That changes the compliance landscape for sectors such as finance and healthcare that depend on cloud providers but are bound by jurisdiction‑specific rules on data location and cross‑border transfers.

What the five‑fold forecast means for Western stakeholders

With the I‑2SEA cable not expected until late 2029, the immediate opportunities lie in positioning within India’s data centre and cloud buildout that is already underway. Three constituencies beyond Indian shores need to watch this closely.

• Western enterprise cloud architects

  Microsoft Azure’s regional expansion and the I‑2SEA cable will eventually lower latency and add capacity between India and Southeast Asia. Monitor Microsoft’s Azure infrastructure updates page for timelines on new regions and connectivity improvements that affect workload placement for AI training, financial services and healthcare applications. Plan your multi‑year architecture now so that when the cable goes live in 2029, your data‑routing options are already mapped to the new capacity.

• Tech investors tracking digital infrastructure

  Lightstorm’s planned mid‑2027 IPO at a reported valuation of up to US$1.5 billion is a bellwether for the sector. A successful listing would signal strong global appetite for Indian digital‑infrastructure assets and likely accelerate further cable and data‑centre builds. Delays or pricing shortfalls, by contrast, would raise immediate questions about project execution and the competitive pressure from other subsea systems. Watch Lightstorm’s filings and Microsoft’s capital‑expenditure disclosures on connectivity for early signals.

• Regulatory and policy analysts

  India’s ILD licensing conditions and Singapore’s IMDA facilities‑based operator rules will directly affect how quickly cables like I‑2SEA can be permitted and built. Track the Indian Department of Telecommunications website (dot.gov.in) for ILD licence guidelines and security conditions that shape foreign participation. In parallel, monitor whether Indian or Singaporean regulators begin to draft AI‑specific governance rules for data flowing through new submarine cables — a gap that will matter increasingly as hyperscalers route traffic through the region.

Explainer

I‑2SEA

The consortium‑backed submarine cable system announced in July 2026 that will connect India to Malaysia and Singapore across 3,600 kilometres. It is designed to carry artificial‑intelligence and hyperscale cloud workloads, with landing stations in Machilipatnam, India, and links to Southeast Asian data centres. The system is expected to be operational by the fourth quarter of 2029 and represents one of several new cables competing to serve India’s rapidly growing data market.

Microsoft

US‑based technology corporation and leading hyperscale cloud provider through its Azure platform. Microsoft is a consortium member in the I‑2SEA cable project, reflecting its strategy of investing directly in submarine cable infrastructure to secure bandwidth, lower latency, and control routing for its AI and cloud services. Its involvement is part of a broader pattern where major tech firms fund subsea systems rather than relying solely on traditional telecom carriers.

Lightstorm

An Indian telecom infrastructure startup backed by private equity, which builds and operates terrestrial fibre networks connecting AI and cloud data zones. Lightstorm is the co‑lead of the I‑2SEA consortium alongside Microsoft and plans to list on Indian exchanges by mid‑2027. Its expansion of connected zones from 19 to 29 through the new cable underscores the company’s bet on becoming a regional digital‑infrastructure backbone provider.

ILD license

International Long Distance licence required by India’s Department of Telecommunications under the Indian Telegraph Act, 1885, for any entity landing or operating international submarine cables in India. The licence imposes specific security conditions and compliance obligations, similar in scope to the scrutiny Western regulators apply to foreign cable ownership. Obtaining the ILD licence is a prerequisite for the I‑2SEA cable to go live in 2029.