The dominant narrative surrounding Indian equities this year has been one of missed opportunity.
India has been largely bypassed by the AI investment boom, with foreign investors pulling nearly $26.4 billion from local equities so far in 2026. The pace of withdrawals puts the country on track to surpass the record $18.9 billion divestment seen in 2025.
The shift has had visible consequences.
India’s stock market has slipped to seventh place globally by market capitalisation after being overtaken by Taiwan and South Korea, whose markets have benefited from soaring valuations in AI-linked companies such as TSMC, Samsung Electronics, and SK Hynix.
India’s weight in the MSCI Emerging Markets Index has also declined, falling to 10.87% in May from 12.82% in February.
Yet beneath the headline disappointment lies a different story.
A growing number of Indian industrial and infrastructure companies are benefiting from the trillions of dollars being deployed globally to build AI data centres, power networks, and digital connectivity infrastructure.
Analysts increasingly argue that India’s role in the AI era may not come through creating the next Nvidia or Taiwan Semiconductor Manufacturing Co., but through supplying the critical components needed to support the global AI buildout.
The AI capex trade gains momentum
Market participants believe the narrative that India has missed the AI revolution altogether is overly simplistic.
According to comments cited by Reuters, Abhay Laijawala, managing director and India chief investment officer at Lighthouse Canton, said India offers a “picks-and-shovels” opportunity through investments linked to electricity, cooling systems, physical infrastructure, and data centres that underpin the broader AI ecosystem.
Fund managers also increasingly see opportunities not in AI software developers but in companies supplying the physical infrastructure needed to support AI expansion.
“We may be on the wrong end of the AI trade, but we could be on the right side of the AI capex trade,” said R. Sivakumar, chief investment officer at Axis Mutual Fund, in comments reported by Moneycontrol.
“One could consider companies benefiting from data centers and the entire value chain associated with this capex.”
Nomura analysts led by Akash Gupta echoed that view in a June 2 report.
“The most attractive exposure is in the industrial supply chain — the ‘picks and shovels’ that build, power, and cool these facilities,” the analysts wrote.
Nomura noted that supply constraints have created favourable conditions for suppliers.
A two-to-four-year lead time for certain components has “created an enviable seller’s market with multi-year backlogs,” the brokerage said, adding that many orders being secured today are likely to generate revenues between 2027 and 2029.
Sterlite emerges as a standout beneficiary
Among the clearest examples is Sterlite Technologies Ltd., whose shares have risen more than 530% this year.
The optical-fibre and connectivity solutions provider received a major boost in May when it secured a multi-year contract from a US-based hyperscaler valued at approximately $1.1 billion.
The agreement involves supplying optical connectivity products used in the construction of AI data-centre infrastructure in the United States.
“Under this agreement, STL, through its optical solutions, will support building AI data center infrastructure in the US for this hyperscaler. We are enabling connectivity backbone for the AI data centers,” said Ankit Agarwal, managing director of STL.
The deal comes on top of an order book that had already increased 67% in fiscal 2026 to ₹7,300 crore.
CLSA maintained its outperform rating on the company and raised its target price to ₹655 from ₹405. It currently trades at ₹582.35.
“This win also strategically expands its presence in AI data centers, improving future growth visibility and even underscoring competitiveness in international markets,” the brokerage said.
HFCL rides global fibre demand
The rally has spread beyond Sterlite.
HFCL, another major optical-fibre supplier, has gained more than 145% this year as investors increasingly view it as a beneficiary of global AI-related infrastructure spending.
According to managing director Mahendra Nahata, demand from data-centre customers has become a major growth driver.
“In the last quarter, the major revenue contribution came from fiber optics, particularly for data-centric applications. Worldwide, there is huge growth in data centers, where prices are also better. Demand is good, and the buyers are all high-quality buyers,” Nahata told Moneycontrol.
Exports now account for a substantial portion of HFCL’s business.
“Currently, more than 70–75% of our fiber optic cable is getting exported, predominantly to the US market,” he said, adding that approximately 46% of revenue came from exports during the year.
HFCL is also ramping up its manufacturing capabilities to cater to the rising demand from data centres.
The company is expanding its fibre manufacturing capacity from 28 million fibre kilometres to 34 million fibre kilometres, while simultaneously increasing production of specialised cables used in data-centre applications.
“For fiber optic cable business and data center expansion, about Rs 200–225 crore is being spent. At the same time, we have announced backward integration into preforms, which is the raw material for fiber. This will give us more supply stability and reduce cost. That project will cost about Rs 580 crore,” Nahata said, adding that total capex will be around Rs 700–800 crore over the next three years.
HFCL’s order book has crossed ₹21,200 crore ($2.5 billion), more than doubling from the previous year.
It has also secured a long-term global optical-fibre supply contract worth approximately $1.1 billion, providing multi-year revenue visibility.
MTAR benefits from AI power demand
MTAR Technologies represents another route into the AI infrastructure theme.
The company, whose shares have gained around 200% this year, manufactures critical components used in Bloom Energy’s fuel-cell systems, which are increasingly being deployed to provide power for AI data centres.
As data-centre operators grapple with power shortages and grid constraints, alternative energy solutions are becoming more important.
Motilal Oswal highlighted MTAR’s strategic position in the supply chain.
“As Bloom Energy’s sole supplier of critical hot box assemblies, commanding a 60-70% wallet share, MTAR is not merely a beneficiary of the fuel cell theme but an irreplaceable enabler,” the brokerage said.
The firm estimates that every gigawatt of Bloom Energy capacity translates into ₹900-1,100 crore of order inflows for MTAR.
The opportunity has expanded further following the enlargement of Oracle’s partnership with Bloom Energy to 2.8 gigawatts from 1.2 gigawatts.
According to Motilal Oswal, the additional capacity could generate incremental orders worth ₹14-17 billion for MTAR, equivalent to roughly 1.6 to 1.8 times its projected fiscal 2026 revenue.
For investors seeking India’s AI exposure, the biggest winners may not be software developers at all.
Instead, they may be the companies quietly supplying the fibre, cooling systems, power components and connectivity networks that form the backbone of the global AI economy.
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