Sterlite Technologies Ltd., an optical-fiber maker owned by the Vedanta Group, has emerged as the standout performer in India's stock market, surging over 530% this year. This remarkable rally is driven by a $1.1 billion multi-year contract from a US-based hyperscaler, positioning the company at the forefront of the 'AI capex trade' in India.
An equal-weighted Bloomberg index tracking 28 Indian companies involved in the data-center ecosystem has collectively added about $47 billion in market value this year, marking a nearly 50% increase. In contrast, the benchmark NSE Nifty 500 has seen a loss of over $300 billion in 2026. The growing demand for data centers, fueled by the global obsession with AI, has turned old-economy industrial firms into market darlings.
Amazon.com Inc. plans to invest $12.7 billion in cloud infrastructure in India by 2030, while Alphabet Inc. is committing around $15 billion to an AI infrastructure hub in Visakhapatnam. Additionally, Reliance Industries Ltd. and AdaniConnex Pvt. are making significant investments in local data centers, further boosting the industrial supply chain.
“We may be on the wrong end of the AI trade, but we could be on the right side of the AI capex trade.”
R. Sivakumar, Chief Investment Officer at Axis Mutual Fund
Nomura Holdings Inc. analysts highlight the attractiveness of investing in the industrial supply chain, which includes companies like Hitachi Energy India Ltd., ABB India Ltd., and Cummins India Ltd. These companies are benefiting from a seller's market with multi-year backlogs, as orders secured now will generate revenue between 2027 and 2029.
Foreign investors are increasingly interested in the Indian industrial sector, with foreign fund shareholding rising to 14% by the end of March, the highest in two years. Despite the lack of pure-play AI firms, India's market is gaining from the infrastructure supporting AI technologies.
“The most attractive exposure is in the industrial supply chain — the ‘picks and shovels’ that build, power, and cool these facilities.”
Akash Gupta, Analyst at Nomura Holdings Inc.
According to Angel One, the market is rewarding companies with visible AI-linked earnings, although valuation risks remain as share rallies leave little room for execution disappointments. Total investments in global hyperscale data centers are expected to exceed $1.2 trillion between 2025 and 2027, expanding the customer base for equipment manufacturers.
Background
The rise of AI technologies has led to increased demand for data centers, transforming traditional industrial firms into key players in the market. This shift is part of a broader trend where infrastructure investments are becoming crucial for supporting AI advancements.
The AI-driven infrastructure boom is reshaping India's industrial landscape, with significant investments in data centers expected to continue. Investors should watch for further developments in the AI capex trade, as companies like Sterlite Technologies continue to capitalize on this trend.
