en.Wedoany.com Reported - Although the overall Indian stock market has missed the direct investment boom in global artificial intelligence, a group of small industrial companies benefiting from the massive construction of AI infrastructure is drawing market attention.
Sterlite Technologies Ltd., a fiber optic manufacturer under the Vedanta Group, has seen its shares surge over 530% this year after securing a multi-year contract worth $1.1 billion from a U.S. hyperscale cloud service provider last month. Its competitor HFCL Ltd. saw its shares rise 191%, while MTAR Technologies Ltd., a maker of precision cooling and power components, more than tripled.
A Bloomberg equal-weight index covering 28 Indian companies serving the data center ecosystem—including transformers, switchgear, wires, cables, and cooling systems—has added approximately $47 billion in total market capitalization this year, gaining nearly 50%. Meanwhile, the NSE Nifty 500 index has lost over $300 billion in market value in 2026.
Since each AI query relies on power-hungry data centers requiring vast amounts of electricity and cooling, traditional industrial companies have transformed into hot investment targets in the Indian market. This trend is dubbed the "AI capital expenditure trade" in Mumbai trading rooms.
R. Sivakumar, Chief Investment Officer at Axis Mutual Fund, said India may be on the wrong side of the AI trade but could be on the right side of the AI capital expenditure trade. He suggested focusing on companies benefiting from data centers and the entire capital expenditure value chain.
Amazon.com Inc. plans to invest $12.7 billion in cloud infrastructure in India by 2030; Alphabet Inc. is spending about $15 billion to build an AI infrastructure center in Visakhapatnam. A joint venture of Reliance Industries Ltd. signed agreements worth $11 billion last year to build local data centers; AdaniConnex Pvt. has partnered with Google and Uber Technologies Inc. to help build its data centers.
Analysts at Nomura Holdings Inc., led by Akash Gupta, noted in a June 2 report that the most attractive exposure lies in the industrial supply chain—the "shovels and picks" that build, power, and cool these facilities. The firm said lead times for certain components range from two to four years, creating a seller's market and accumulating years of order backlogs. Orders secured now will generate revenue between 2027 and 2029.
Foreign investors have flooded in. According to Elara Capital (India) Pvt., foreign funds' holdings in industrial stocks rose to 14% by the end of March, the highest in two years, even as global funds continue to sell Indian stocks at record levels.
From a global perspective, India is one of the worst-performing markets because it lacks pure-play AI companies and semiconductor manufacturers that have driven stock markets in Taiwan and South Korea. However, global spending on generative AI is boosting companies that sustain hyperscale cloud service providers, such as Hitachi Energy India Ltd., ABB India Ltd., and Cummins India Ltd.
The surge in shares of these overlooked beneficiaries has not been factored into the overall index, as many companies like Sterlite and MTAR remain excluded from the broadest domestic indices. Angel One said the rise in stocks like Sterlite and MTAR stems from market recognition that AI is creating a multi-year infrastructure capital expenditure cycle, not just a software opportunity.
Angel One estimates that global investment in hyperscale data centers could exceed $1.2 trillion between 2025 and 2027, expanding the customer base for related equipment manufacturers.
Mahesh Viswanathan, CEO of Finolex Cables Ltd., said on a recent earnings call that this is the right time to enter the industry. Finolex shares have risen nearly 36% this year. According to Angel One, the market is rewarding companies with visible AI-related earnings, not just thematic concepts. The brokerage added that the biggest near-term risk is valuation, as share price increases have "left no room for execution failures." For example, pure-play data center company Anant Raj Ltd. has seen its shares rise only about 8% this year, while Sterlite's 12-month forward price-to-earnings ratio is around 70 times, compared to 19 times for the NSE 500 index.
Nomura analysts wrote that data center capital expenditure has become the largest single industrial investment cycle of the modern era, surpassing global 4G wireless network deployments, post-2008 LNG construction, or the shale boom of the early 2010s.
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