By Asmi Bhatia and Alex Gabriel Simon
The overarching narrative is that Indian equity markets missed out on the global artificial intelligence boom. But a look under the hood reveals a slew of smaller firms winning from trillions of dollars being spent on AI capacity.
The poster child for this rally is Sterlite Technologies Ltd., the optical-fiber maker owned by the Vedanta Group, which has surged more than 530 per cent this year. It got a $1.1 billion multi-year contract from a US-based hyperscaler last month. Its competitor, HFCL Ltd., has jumped 191 per cent while MTAR Technologies Ltd., which makes precision cooling and power components, has more than tripled.
Since every AI query runs through power-hungry data centers, which require immense electricity and cooling, old-economy industrial firms have transformed into India’s hottest market play. In Mumbai dealing rooms, it’s called the ‘AI capex trade.’
“We may be on the wrong end of the AI trade, but we could be on the right side of the AI capex trade,” said R. Sivakumar, chief investment officer at Axis Mutual Fund. “One could consider companies benefiting from data centers and the entire value chain associated with this capex.”
Great to meet @gautam_adani in Ahmedabad this morning and build on our existing partnership with the Adani group. As India fast emerges as a leading innovation hub for @Uber, we are setting up our first data center in the country with the Adani Group to test and deploy our tech.… pic.twitter.com/jll5NcPT4l
— dara khosrowshahi (@dkhos) May 13, 2026
A Reliance Industries Ltd. joint venture signed an $11 billion pact to build local data centers last year, while AdaniConnex Pvt. has partnerships with Google as well as Uber Technologies Inc. to help build their data centers.
‘Picks and Shovels’
“The most attractive exposure is in the industrial supply chain — the ‘picks and shovels’ that build, power, and cool these facilities,” Nomura Holdings Inc. analysts led by Akash Gupta wrote in a June 2 report.
Also, a two-to-four year lead time in supplying some components has “created an enviable seller’s market with multi-year backlogs,” Nomura analysts wrote, adding that orders secured now will bring revenue between 2027 and 2029.
Foreign investors are already piling in. Shareholding of foreign funds in industrials rose to 14 per cent as of end-March, the highest in two years, according to Elara Capital (India) Pvt., even as global funds remain record sellers of Indian stocks.
On a top-down basis, India is one of the worst-performing markets globally as it lacks pure-play AI firms and semiconductor makers that are turbocharging Taiwanese and South Korean equities. But the global obsession with generative AI is boosting those that keep these hyperscalers running, such as Hitachi Energy India Ltd., ABB India Ltd. and Cummins India Ltd.
“The rally in companies like Sterlite and MTAR is driven by the market’s growing conviction that AI is creating a multi-year infrastructure capex cycle, not just a software opportunity,” according to Angel One.
Mahesh Viswanathan, chief executive officer of Finolex Cables Ltd. said in an earnings call last month that this was “the right time to be in this industry.” Finolex’s have surged nearly 36 per cent this year.
The market is rewarding companies with visible AI-linked earnings rather than just thematic exposure, according to Angel One. Also, the biggest near-term risk is valuation as share rallies have left “no room for execution disappointments,” the brokerage added.
For instance, Anant Raj Ltd., the only listed pure-play data center firm, has gained just about 8 per cent this year. Meanwhile, Sterlite is trading at about 70 times its 12-month forward earnings, compared to NSE 500’s 19 times.
But no market watcher is downplaying this opportunity.
“Data center capex has emerged as the single largest contemporary industrial investment cycle,” Nomura analysts wrote. It’s “larger than the global wireless 4G roll out, the post-2008 LNG build-out, or the early-2010s shale boom.”
