Jakarta is Nadella's first stop on a trip to Southeast Asian countries aimed at promoting the U.S. company's generative AI technology. He will go to Malaysia and Thailand later this week.
Microsoft's investment will "bring the latest and greatest AI infrastructure to Indonesia," Nadella said.
"We're going to lead this wave in terms of AI infrastructure that's needed," he added.
Nadella met outgoing President Joko Widodo and his cabinet ministers earlier on Tuesday to discuss joint AI research and talent development, Communications Minister Budi Arie Setiadi told reporters.
Widodo suggested Microsoft base its data centres on the resort island of Bali or in the new capital city Nusantara, which is still under construction in the jungle of Borneo, the minister said.
Microsoft will train 2.5 million people in Southeast Asia in AI use by 2025, Nadella said, including 840,000 in Indonesia.
Microsoft is trying to expand its support for the development of AI globally, including with a $2.9 billion investment in cloud and AI infrastructure in Japan and a $1.5 billion investment in UAE-based AI firm G42.
Nadella's Jakarta visit comes two weeks after Apple Inc (AAPL.O) CEO Tim Cook met Widodo and said he would look into building a manufacturing facility in Indonesia.
Indonesia has a huge, tech-savvy population, making the Southeast Asian nation a key target market for tech-related investment.
