San Francisco Frontiers - Cables and cooling bring AI windfall to Indian suppliers

Indian manufacturers are cashing in on the AI infrastructure buildout by supplying cables, power systems and cooling equipment -- even as investors worry the country is falling behind in the race to develop the technology.

Analysts at Nomura describe it as a classic "picks and shovels" trade, a riff on how selling tools during a gold rush can earn people more than searching for the precious metal.

For Ankit Agarwal, managing director of Sterlite Technologies, serving the world's biggest tech companies is a dramatic shift for his firm, once known mainly as a supplier to telecoms networks.

"This is a once in a lifetime opportunity," Agarwal told AFP in Mumbai. "This is a kind of entire new network."

India has enthusiastically adopted AI but has yet to produce globally competitive models and remains dependent on imported advanced semiconductors.

Investors also fear that generative AI could disrupt the country's $315-billion IT services industry by automating tasks long outsourced to India, such as customer service and app maintenance.

These worries have weighed on markets, with the benchmark Nifty 50 down around seven percent this year and foreign investors pulling over $27 billion from Indian equities.

- 'Tsunami' -

The data centre boom is generating windfall gains for companies largely overlooked by investors, offering a bright spot in a market rattled by concerns over AI's impact on India's export-oriented tech sector.

"India doesn't need to make the chip or train the model to benefit," Prateek Nigudkar, a fund manager at Shriram AMC, told AFP.

"Every data centre needs switchgear, transformers, cables, cooling systems and grid connectivity, and Indian manufacturers are already in that supply chain."

Fibre-optic cable producers have been among the biggest beneficiaries.

Strong demand for networks linking data centres has helped manufacturers secure contracts once considered out of reach.

Sterlite earlier this year announced a $1.1-billion multi-year order from a US hyperscaler -- a term meaning a large-scale cloud service provider -- helping drive its shares up 400 percent this year.

Telecom equipment maker HFCL reported its strongest-ever April-June quarter, with revenue more than doubling on AI demand.

Founder Mahendra Nahata said he was going all out to scale up production.

"We used to increase capacity probably once in three years, once in five years. Nowadays, it's become a daily routine," he told AFP, comparing the buildout to a "tsunami".

The gains extend beyond fibre cables.

Shares in TD Power Systems have jumped 68 percent on expectations of rising demand from AI facilities, while MTAR Technologies has benefited from demand for power units used in fuel-cell systems serving big-tech operators.

- 'Big investments' -

Analysts, however, warn valuations have become stretched, while growing opposition to energy-guzzling data-centre projects also poses a risk.

Data Center Watch, a tracker run by AI intelligence firm 10a Labs, says at least 75 US projects worth some $130 billion were delayed or blocked in the first quarter of 2026.

Indian executives acknowledge the risks could hurt near-term sentiment but argue domestic demand would eventually offset any slowdown abroad.

India hosts nearly a fifth of the world's data, but accounts for less than five percent of global data-centre capacity -- leaving much room for growth.

An AFP review of funding announcements shows US hyperscalers have committed some $57 billion in new Indian capacity over the past year, while conglomerates Adani and Reliance have pledged $100 billion towards digital and infrastructure projects.

Unlike in parts of the United States and Europe, data centre development in India has faced limited resistance so far.

"Opposition is probably in a very nascent stage," said Sharad Agarwal, chief executive of data centre operator Sify Infinit Spaces.

He said operators had adopted technologies such as closed-loop water cooling systems to reduce pressure on local resources.

Sify, which operates 16 data centres and has nearly a dozen more under development, is considering an IPO that would make it India's first listed data-centre operator.

"We are talking about big investments. If I need to be a one-gigawatt company, I need $5 billion," Agarwal said. A computing power capacity of one gigawatt is often referred to as "hyperscale".

"Then only we can go and grow."

F.Garcia--SFF