Every decade has its standout investment opportunity. The internet boom defined one era, while Bitcoin and cryptocurrencies captured another. This decade, data centres appear poised to take centre stage, emerging as the backbone of the AI revolution and a potential wealth creator for investors.
A recent anchor report on data centres by Nomura, titled “A Decadal Growth Opportunity”, suggests that the sector could be on the cusp of a multi-year expansion cycle. Driven by surging demand for artificial intelligence, cloud computing, digital services and data storage, data centres are rapidly becoming one of the most critical infrastructure assets of the digital economy.
For investors, the report points to what could be another defining opportunity of the decade, much like the internet and crypto booms that preceded it. Nomura believes that India’s data centre industry is posed to grow at a compounded annual growth rate (CAGR) of 30% to 7GW by 2030 from around 1.5-1.6GW at present.
“We estimate incremental capacity of around 5.1GW until 2030 will provide a capex opportunity of $35 billion, a majority of which will be captured by industrial equipment manufacturers supplying electrical/mechanical and cooling solutions to DCs. Companies operating in switchgear, transformers, generator sets, UPS systems, cooling equipment and rack infrastructure should benefit from sustained premium pricing and multi-year order visibility,” the brokerage said, adding this presents a compelling long-term opportunity across both DC developers and broader supply chain.
Within the country’s capital markets, for investors, the most attractive exposure is in the industrial supply chain, according to Nomura. It estimates five product categories including medium-and low-voltage switchgear and transformers, UPS and battery systems, backup diesel and gas gensets, precision cooling and liquid-cooling distribution units, and rack, busway, and structured cabling infrastructure together absorb 60-75% of a DC’s $10-22mn/MW capex budget.
“In our view, the competitive landscape in India is consolidated and pricing disciplined with players such as ABB India, Siemens, Hitachi Energy India, GE Vernova, CG Power and Cummins India are acting as oligopolistic suppliers across multiple sub-categories,” Nomura said. It estimated the combined market shares of above 40% for the aforementioned companies in each category.
