By Aditya Soni and Deborah Mary Sophia

BENGALURU (Reuters) -Microsoft will spend $3 billion to expand its Azure cloud and artificial intelligence (AI) capacity in India, CEO Satya Nadella said on Tuesday, doubling down on a country with tech expertise and low costs to help turn such investments profitable.

The two-year investment, its biggest ever in the country, will also be used to upskill Indians in AI, a Microsoft spokesperson said, clarifying this outlay was on top of the company's recently announced plan to invest $80 billion on AI-enabled data centers in fiscal 2025.

India is a key growth market for U.S. tech giants, with executives ranging from Nvidia boss Jensen Huang to Advanced Micro Devices CEO Lisa Su visiting the country in recent months, promising big investments.

Microsoft, which has more than 20,000 employees across 10 Indian cities, is aiming to both help the local tech community develop and tap into its talent base, Nadella said at a conference in the southern Indian city of Bengaluru.

He noted the community's contribution to Microsoft, specifically to their involvement in AI projects on GitHub Copilot, the company's generative AI-based tool for developers.

"India is the second-largest (developer community on GitHub) after the United States. In fact, it's projected to be the largest in 2028."

"We also have contributions from India AI projects that are just second to the United States."

Microsoft, like its tech peers, has come under pressure to show that the billions it has invested in AI technology will start to reap profits.

GitHub, though, is one of its few AI bets that has generated returns. In July, Microsoft said the tool had an annual run-rate of $2 billion.

Microsoft plans to train 10 million people in AI in India by 2030, Nadella said. The company upskilled 2.4 million people last year.

Like other big tech executives, the Indian-born Nadella enjoys strong popularity in a country where engineering degrees are seen as a path to prosperity.

Hundreds of people gathered on Tuesday to hear his keynote, which is part of the "Microsoft AI Tour."

Among them was Prashant Bhanawat, a software engineer whose company uses Azure AI services, who said he waited for more than three hours to enter the conference venue.

"This is a chance for us to see the products in development before they are rolled out, and to obviously see Satya Nadella."