Indian suppliers cash in on AI infrastructure boom

In a bustling factory in western India, technicians are working around the clock to produce fiber-optic strands for data centers that power the global artificial intelligence boom. Indian manufacturers are capitalizing on the AI infrastructure build-out by supplying crucial components such as cables, power systems, and cooling equipment.

Analysts liken this trend to a "picks and shovels" trade, where supplying tools during a gold rush proves more profitable than prospecting for gold itself. For Ankit Agarwal, managing director of Sterlite Technologies, this shift to serving the world's largest tech companies marks a significant transformation from his firm's previous role as a telecom network supplier. "This is a once in a lifetime opportunity," Agarwal stated, describing it as an "entire new network."

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This is a once in a lifetime opportunity. This is a kind of entire new network.

While India has embraced AI, it still depends on imported advanced semiconductors and has yet to develop globally competitive AI models. Investors also worry that generative AI could disrupt India's $315 billion IT services industry through automation. These concerns have impacted markets, with the benchmark Nifty 50 index declining and foreign investors withdrawing substantial amounts from Indian equities.

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India doesn’t need to make the chip or train the model to benefit. Every data center needs switchgear, transformers, cables, cooling systems and grid connectivity, and Indian manufacturers are already in that supply chain.

The data center expansion is creating substantial profits for companies that investors have largely overlooked, providing a positive outlook in a market concerned about AI's effect on India's export-driven tech sector. "India doesn’t need to make the chip or train the model to benefit," said Prateek Nigudkar, a fund manager at Shriram AMC. "Every data center needs switchgear, transformers, cables, cooling systems and grid connectivity, and Indian manufacturers are already in that supply chain."

Fibre-optic cable producers are among the biggest winners. Strong demand for networks connecting data centers has enabled manufacturers to secure contracts previously considered unattainable. Sterlite Technologies, for instance, announced a $1.1 billion multi-year order from a US hyperscaler, contributing to a 400 percent surge in its shares. Telecom equipment maker HFCL reported its best-ever April-June quarter, with revenue more than doubling due to AI demand. Founder Mahendra Nahata described the production scale-up as a "tsunami," with capacity increases becoming a "daily routine."

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We used to increase capacity probably once in three years, once in five years. Nowadays, it’s become a daily routine.