The artificial intelligence investment thesis has aggressively pivoted from silicon and software toward heavy infrastructure.
In India, power and electrical equipment stocks have emerged as the premier proxy trade for the AI boom.
Investors are aggressively pricing in the reality that hyperscale cloud computing, large language models, and vast data centres share a single, non-negotiable dependency: a colossal and uninterrupted supply of electricity.
The resulting price action has been steep. Hitachi Energy India has doubled investor capital this year, establishing the benchmark for the sector. Kirloskar Oil Engines has posted a 76% surge, while GE Vernova T&D India, Voltamp Transformers, and Siemens Energy India have advanced 40%, 38%, and 28%, respectively. Cummins India has also captured a 26% upside.
This momentum illustrates exactly how quickly the market has identified the secondary beneficiaries of global digitisation.
Data centres do not just draw raw wattage; they require a complex orchestration of transformers, high-voltage cables, switchgear, grid connections, and robust backup power.
As Paresh Bhagat, Chairman of Mangal Keshav Financial, points out, the AI surge has permanently strengthened the long-term investment case for India’s power ecosystem.
The operational math is striking: 1 GW of data-centre capacity demands roughly 1.5 GW of round-the-clock power, which in turn necessitates close to 6 GW of renewable capacity when factoring in grid intermittency and storage constraints.
The CapEx Cycle Triggered by Hyperscale Demand
The market is fundamentally re-rating power equipment manufacturers as indirect technology plays. Puneet Singhania, Whole-time Director at Master Capital Services, notes that the sheer scale of modern digital infrastructure has forced a revaluation of the entire electricity value chain.
From generation and transmission to distribution and grid modernization, capital expenditure cycles are expanding.
Investor capital has been concentrated in a relatively small group of companies. Equipment manufacturers and engineering, procurement, and construction (EPC) firms have captured the lion’s share of investor interest.
Their business models allow order inflows from data centre developers and transmission expansions to translate directly into top-line earnings. In contrast, regulated utilities have experienced more muted price action.
Regulatory limits keep returns on equity relatively stable, making utilities better suited for consistent dividends than rapid AI-driven growth.
Although India is expanding more gradually than the United States, investment in data centre infrastructure continues to accelerate.
Conglomerates like Reliance, Tata, and the Adani Group, alongside global cloud providers, are committing heavily to localized infrastructure.
Balaji Rao Mudili, Research Analyst at Bonanza, highlights that companies like Hitachi Energy India and GE Vernova T&D India are already trading on expectations of massive order-book expansion linked to these domestic mega-projects.
Separating Fundamentals from the Narrative
The runway for the AI-power theme is clearly multi-year, but the margin of safety for new capital has shrunk. When a sector experiences a vertical rally, the risk of mispricing individual assets escalates.
Operating in the electrical sector alone does not ensure that a company will win hyperscale data centre contracts.
Bhagat specifically warns against deploying capital based on the fear of missing out, noting that a strong industry tailwind does not justify acquiring stock at any valuation. The critical differentiator moving forward will be execution.
Investors must scrutinize order-book quality, capacity utilization, margin sustainability, and, most importantly, cash-flow conversion.
He also notes that many stocks already reflect optimistic growth expectations in their current valuations.
Market participants need to track specific linkages: Hitachi Energy and Siemens Energy India for high-voltage direct current (HVDC) and data centre power, Kirloskar Oil Engines and Cummins India for critical genset backup, Polycab and KEI Industries for specialized cabling, and Voltamp or Apar Industries for transformer solutions.
The initial phase of this trade heavily rewarded early positioning. The next phase will be distinctly unforgiving to companies that fail to convert the AI narrative into tangible earnings delivery.
Source: The Economic Times, "AI Powerplay! Proxy Power Stocks Give Up to 100% Returns in India's Hottest Trade This Year"
