India's data-centre expansion and its supply chain

India's data-centre sector is entering a new phase of growth, underpinned by a forecast increase in capacity from 1.6 GW in mid-2026 to 6 GW by 2029. This expansion is supported by more than US$50bn in commitments from hyperscale cloud providers, according to JLL India (July 2026). Government initiatives such as the IndiaAI Mission, with a budget of ₹10,372 crore, and the India Semiconductor Mission, which has approved 12 projects worth about ₹1.64 lakh crore, are also directing capital towards digital infrastructure (Digital India, 29 September 2026, and PIB, 27 June 2026).

Measurable exposure through suppliers

We find that the most direct participation in India's data-centre build-out lies with suppliers of power, cooling, electrical equipment and precision components. These segments already show visible demand, and company-level EBITDA margins range from about 4% to almost 16% among India's contract electronics manufacturers (Zerodha, The Daily Brief, 20 May 2026). This dispersion highlights the importance of focusing on companies at the upper end of the margin range, where audited cash flow provides a clearer basis for valuation. The sector average does not capture the variability in performance among individual suppliers.

The application layer remains at an early stage

In contrast, the application layer of AI in India remains at an early stage. Although government funding is increasing affordable computing capacity, we consider it too early to identify the AI application providers that will establish durable positions.

In our view, company selection within the supply chain is more significant than exposure to the theme itself. We continue to favour suppliers with strong margins and transparent cash flow, as these offer the most measurable exposure to India's data-centre expansion.