India Data Center Opportunity: Growth, Risks, and Key Drivers | Ganesh Komma

Welcome everyone to yet one more powerful learning. Today what we will be discussing is, we will be discussing about the entire data center theme which is a very important buzzword. Now AI artificial intelligence is always happening and even the recent AI summit which happened in Delhi is a quick update about what is the kind of a focus where the Indian government and what is the kind of a trends that are happening happening in AI and in data center theme is what we will be looking at today. And whoever are not aware. My name is Ganesh Kumma, I'm India's leading finance and stock market coach and I have a community called as Financial Freedom Implementation Program. So our main focus is to study about fundamentals and technicals, about the stocks and taking short term and long term decisions combining both fundamentals and technicals. So so now without any further ado, let me share my screen and let's start the discussion regarding one of the very very powerful theme which is emerging called as the India Data center theme. Now this strategic investment we go into deep dive and we will look at how AI artificial intelligence is converging, what is the data sovereignty and how we are looking at a structural wealth theme which is almost like a hundred billion dollars plus capital infusion that is happening. We will be focusing today. But before we start the discussion. Yes a quick disclaimer. As you know we are semi registered entity so this is a standard disclaimer. None of the stocks, sector or any of the companies where I use in this presentation do not consider them as any recommendation of addition, buying or selling. Please treat them purely as a case study or as a educational purpose. Do not treat any of the stocks or the securities which we quote today as any recommendation of a by add or a sell. Now first of all looking at this entire theme, right the AI theme or the data center theme here we are clearly observing an investment capacity of around $100 billion plus. So the total investment, or we can call it as a capital expenditure, right which is coming into this theme is huge and the total investment which the global technology gains are committing into the Indian conglomerates is more than $100 billion plus. And even if you look at the recent government wise also there was a proposed data center policy and it says tax holiday for the next 20 years. And this is a very good opportunity for someone who are looking at a long term because this investment is going to happen in a period of five to 10 years. So it's a clear long term theme and maybe on the short term we may see some volatility but it clearly emerges As a long term opportunity. And what we will do now, we will decode all the data center components, the entire ecosystem, in terms of its capital expenditure. So let me share my screen and we will discuss about the entire ecosystem of data center. So as you observe my screen, what is that we are observing? If you look at the entire components, right, the entire ecosystem, we can see a clear framework in the entire components. So first of all, cabling and networking, right? We have IT hardware, right? Backup, power and cooling systems. And even your civil and shell, I call it as a shell, which is nothing but your land and all the four segments, right? And we will go into all these segments, what are the companies or what are the listed players which are already there in the market. We'll go into deep dive. But my focus here is to show you how much capital expenditure is expected in this fully integrated data center facility. First of all, looking at the entire IT hardware itself, which are your servers, GPUs, storage and switches, we can expect around 65 to 75 percentage of the capital expenditure, which means capital expenditure is nothing but the fresh investment which is coming into this segment. Power and cabling, right? Which are like your UPS generators, chillers, around 20 to 25% and even civil and shell, which is nothing but your land, building permits, right? Which is your infrastructure and all that almost 5 to 10 percentage capex, right? And further deep dive of all these three categories, yes. IT hardware, power infrastructure, cooling systems, backup, UPS and DG sets, land and core shell cabling and networking. And the best part is this entire infrastructure theme, right? There are many listed players which are there in all of these components. And that is what we are going to discuss as we move forward in our discussion right now first of all, let's understand what exactly is the data center. So data centers are those where it is a specialized facilities where they house servers, GPUs and advanced controlling systems, right? So everything put together, the servers, GPUs, cooling systems. And it's a big setup. It is like a centralized computing power at one place. Normally it is impossible to keep like a standard devices. So the entire centralization of all these computing power systems will happen in data centers. Now be it like cloud computing, right? Or the streaming services, for a very large scale data delivery happens in this larger data centers. Now if you look at the Indian data center infrastructure, and I call it as a mega cycle, we can divide that under four different layers, right? Starting from foundation to the services. And what I will do, we'll discuss all these four layers and in all These four layers, what are all the stocks which are relevant in those layers? Also we'll discuss first layer is nothing but your own power generation. So this is where your entire grid automation, backup generators, cables and power management systems happen. The second layer is nothing but your cooling and EPC which are like your precision cooling, liquid cooling and turnkey construction happens in this cooling. And the third is about core infrastructure, all your data center operators, connectivity networks and hardware manufacturing. And the last layer which is fourth layer is nothing but your IT services, your cloud migration, a enablement and managed service integration happens here. And if you look at this entire mega cycle of these four layers, India's data center IT load is expected to grow four times, right? Which means from 1.7 gigawatts to around 7.8 gigawatts for the next five years. And what I will do, I'll just show you the kind of a power requirement that is required just to service all this. So if you look at it not only domestically, right? Internationally also, if you see the power demand from AI data centers is going to quadruple in the next 10 years, which means it is going to increase four times in the next 10 years. I've given you a chart, right? As per the sources from the Bloomberg 2026 which we are right here now versus the next 10 years. If you see the demand is increasing in power for all the data centers, right? As as the data itself shows and even India is also one of the big player in this power consumption. Also what we will do, we have just now discussed about the key four layers, right? The infrastructure mega theme. So I'll also give you all the different layers of it and in every layer what are all the stocks related. And as a disclaimer, do not consider any of the stocks or the scripts which you are discussing here as any recommendation of a buy add or a sell. Use it purely for educational purpose or as a case study. Okay, so the entire Indian data structure mega cycle if you see in the first layer is where we get the grid power stability and electrical foundation. So in grid and high voltage we have stocks like Hitachi Energy mainly related to grid automation, GE Vernova which is doing a wonderful job related to transformers. And we have KEC International especially on the transmission lines, backup power, Cummins India on the diesel gas generators, KOS Oil engines, TD Power which is also playing a wonderful play in in the AC generators, cable and components, polycab K Industries, phenolics cables, APAR Industries and RK cable, RR cable. And on the management Simons India CG power plays a very very important role. Now coming to the second layer which is nothing but your cooling, thermal management and EPC shells. We have precision cooling, liquid cooling and even on the construction we have companies like LNT which is like turnkey execution, right? And the third layer which is nothing but your. But which is nothing but your core infrastructure, hardware and connectivity. Related comes your DC operators like Bharati Air Retail Nextra which has a 1 gigawatt is the capacity target for it. We have Anantaraj, especially in the real estate play. Also 300 megawatts plus capacity, techno electric. And even on the hardware electronics connectivity we have some key companies, right? Even on the hardware and electronics network, AI ready servers, right? NetWeb E2E. Also in the recent AI Summit 2026 right. Happening in Delhi, there was also news related Netweb and Nvidia partnership entering into an agreement or even with the E2E. And we have seen a sudden surge in the stock price movement also. It's more or less like a news based reaction rather than any fundamental change in the business. Looking at the last layer, IT services, cloud migration and integration, we have some of the IT players even we have like persistent systems. And even mainly on the infra integration we have companies like Black Box which is into the complex internal and networking is the theme, right? So if you broadly see among these four layers, there's a lot of capital expenditure that is happening. And we'll also discuss who are all the major players who are entering into India as a major conglomerate. But before that I want you to understand what are all the macro drivers which are leading to this kind of an up move. First of all, let's look at the angle of regulatory and geopolitical catalyst. First comes is data sovereignty. If you look at rbi, our regulator or even look at telecom, no one would love to have our citizen data somewhere else. So one of the key driver for IT is data sovereignty. RBI and telecom mandates requiring Indian citizen data stored within India. That's a big macro driver. Second, strategic control, the captive centers for enhanced security versus public cloud dependency. Third, geopolitical power data infrastructure is emerging as a primary economic power source in digital age, right? Yes, right. Now as they say, data is the new gold, right? Earlier oil used to be considered as a gold. Now data is emerging as a new gold. And also state incentives. Like if you take the example of Andhra Pradesh, right? Andhra Pradesh has been offering land and power subsidies to all these big players. And even of course there are many other states also. But recently Andhra Pradesh has been into more limelight because of more and more projects coming out especially related to data centers because of more land and power subsidies. If you look at the investment floodgates. Yes. Into data center we have been seeing a lot of buzz happening here. For example Adani and Google, the joint venture, right. It's a $15 billion investment for a 1 gigawatt platform by 2030 second Reliance Consortium 11 billion dollar with Brookfield and digital reality hyperscalers. Right? $67 billion and above. We have been seeing from Amazon, Microsoft and Google. Not only that, if you see in Maharashtra, yes. A 1 GW data center announced at WEF Davos which is around 60,000 crores and above pan India expansion. Even in Telangana a 25, 250 megawatts plus Andhra Pradesh 300 megawatts where we are seeing a capital inflow of around 30,000 crores. Right? Is the projected kind of investment opportunities. Right? And beyond all this, let's look at some of the conglomerate players coming to Airtel. Right? Airtel data Center ARM which is your Nextra data focuses on significant capacity expansion. Even you can look at Adani, right? Adani edged Connects and even Reliance and Brookfield joint venture where they wanted to be a very dominant Pan India player. And all this investment exposures via the parent companies also opens up a possibility of any future IPOs, initial public offers or even we can expect some REITs also here, right? Like a real estate investment trust, we can expect something in the Future on either REITs or even as a IPOS initial public offer which we can expect in the future. Now looking at the listed players among the segment in the infrastructure and epc. Right. Engineering, procurement and construction. We have L and T which caters to the end to end engineering and construction solutions. You look at power and critical systems, we have Cummins India, ABB India and Hitachi which focuses more on power management, automation and generators. Connectivity wise. Yes, we have a Tata Communications, your E2E realtel. Even in the cloud services and the real estate we have Anantraj which is mostly into the development space. So what are all the direct and pure plays? Here is Anantraj which is a real estate developer targeting around 307 megawatts capacity by 2030 BTI Airtel which is your nextra, a telecom giant with 6,000 crore data center investment. And also if you look at the enablers and indirect place, right? Indirect we have Netweb which provides high end servers and GPU solutions. Cummins India power generators, black box infrastructure design and implementation and cables Wise we have Polycap like that and just give you a basket of data center wherein in a single screen you will be able to see what are all the data center related stocks here. So CG Power in India, Power equipment wise, Schneider Electric, we have TD Power system generators, Hitachi, Cummins, Sterilite, Aeroflex mostly to the piping. And MTR technologies focuses on fuel cells, right? Even in the defense category wise also MTR which is almost like more than 55 years plus existence 45 decades of existence in this business. And it manufactures precision hot boxes, right? And it has recently signed $2.65 billion deal. And then we have upper industries, right? So this is a just a a quick glance about all the stocks related to this particular theme. And now before we close the room it is equally important to discuss what are the critical risks involved here, right? And before that if someone who are watching this session for the first time or someone who are coming to this channel for the first time, I would recommend or I would highly encourage you to click on the subscribe button and whatever data I've shared till now if you feel sir, this has helped me to understand more about data center. This has at least opened up my minds to look at what are all the internal infra segments which we have on data center or what are all the four layers of data center. And if this information you found it useful, please click on the like button so that this video will reach to more number of people who are the right audience who really require this knowledge, right? And even yes please do share click on that share button and share this video to someone whom you feel who follow stock market, who follow a smart investing. If this information will help them for their long term wealth creation, please do share it to them. If you have not yet subscribed, subscribe. If you have not yet liked, do it right now. And if any one of you are not aware, I also conduct a free master class, a free webinar for all those serious investors who really wanted to create wealth. It's a two hours free master class. The link is there below this video under description. Please do click on it and register for the free master class. You will analyze the entire technical and fundamental analysis of the market in that free master class which I take the. Okay. And now coming back to the critical risks. If you look at it, there are certain resource and input challenges. So the first thing which I look at is power dependency. 75% coal based grid faces volatility, supply shocks impacting cost, right? So power dependency is huge. Second Water scarcity in India, especially if you look at states like Mumbai, Bangalore, you already know what kind of a water shortage we are already facing, right? So cooling systems are heavily water intensive. And third margin pressure, when the resources fluctuate, it will directly threaten the profitability of the data center companies. And lastly, sustainability clash, right? Growth targets make conflict with future ESG regulations, right? Yes, it is good to have more investment, more growth in data centers. But it will directly impact ESG regulations which is your environmental, social and governance related regulations. Apart from that, the second critical risk market and execution risks over capacity bubble. If you see the right kind of an investment which is coming in, there is a euphoria of capex which is coming into India, right? So there is an over capacity bubble. Second, rapid obsolete, which means the hardware what we are using normally gets outdated every three to five years, right? So there is a continuous reinvestment which is required in data center. Third, execution risk. Yes, aggressive targets are what every data center company has kept. But it also depends on flawless project execution. Project project should be managed very well. And execution will clearly signify the further sustenance and last critical risk interest rate sensitivity. Right? So high leverage is also vulnerable to rising finance cost. So right now the problem is banks are also ready to finance. But whether this finance cost is something where the company can tolerate it or not. Because need to observe and whether this high leverage, high leverage means more debt, more loan should also be sustaining by the company. And now as we see the entire scenario data center theme, the investments the capex is coming good. It purely depends upon how well they are able to execute, right? Investment is one part whatever money they have received, if they are generating profit out of it and if they are going in the right move, that is where success lies. And if you see right now on the valuation majority of the data center related companies are like at a sky high valuation. Like for example, if you look at NetWeb, NetWeb Technologies PE versus the industry standard, it's like a sky high. And right now the companies need to execute perfection, right? There is no room for executional errors. So what is that you need to monitor? In this entire framework, policies should be finalized as early as possible by the government, right? The tracking should be more good on the national data center policy capacity utilization, right? Every company should monitor their existing supply with the actual execution capability. And third, should promoter action. We need to also observe whether any insider buying or selling happening QIP pricing corporate actions, right? And lastly, global queues. We need to watch how is the AI investment trend happening globally and also valuation matters and if you ask me, a balanced perspective is what we need to follow, right? Yes, the opportunity is real. There are many reasons that the data center will evolve because of the AI growth which is mandatory, undeniable digitalization is happening, AI is being adopted and regulatory wise also there are a lot of tailwinds supporting this AI team. The path is capital intensive, right? There is heavy investment which is coming and we observe certain resource constraints as well and and valuation wise it is compelling. But yes, we need to enter into reasonably valued stocks and we need not chase the momentum, right? We need not chase the momentum and most importantly do not chase the overvalued stocks and most importantly do not chase news. News based actions will not sustain for a longer term, but any company which is fundamentally and technically good should be kept in our radar, right? So I want you to let me know below in the comment section what are your key takeaways out of this data center theme and what are those stocks which you are tracking in this theme? It can be directly data center related or all the four layer which we have discussed, right? What are all those stocks which are tracking and what are those companies which you feel sir, these are my tracking list for 2026 and beyond. Do let me know in the comments along with your key takeaways and I'll again see you in the next video. And also let me know which topic would you ask me to cover in the next video. Thank you. Signing off.