The data center investment cycle is accelerating. While 2025 was strong for capital spending, 2026 will be even stronger given the scale of investment. So far, for 2026, Amazon has announced $200 billion (₹18 lakh crore), Alphabet $185 billion, up from $91.5 billion in 2025, Meta between $115-135 billion, and Microsoft $120 billion.
The $650B AI Race
This investment alone amounts to $650 billion (approximately ₹58.5 lakh crore), equivalent to the market capitalization of the five largest companies in India. This underscores the sheer scale of spending on Artificial Intelligence by Hyperscalers.
Many winners could potentially emerge from this level of spending, including those from Data Centers, which sit at the center of this investment cycle. As AI workloads scale up, utilisation levels rise faster, and the need for data centres may increase.
This article examines three Indian data center stocks that are expected to benefit from this capital expenditure.
#1 Sterlite Technologies: The vertical integration play
Sterlite Technologies (STL), part of Vedanta Group, is a global leader in digital connectivity infrastructure, with a primary focus on optical networking. The company operates through two main business divisions: Optical Networking Business and STL Digital, which focuses on technology solutions, including cloud computing, cybersecurity, enterprise SaaS, and AI.
The “glass to gigabit” edge: Sterlite’s manufacturing advantage
Optical networking is its core business, providing end-to-end solutions including optical fiber, optical fiber cables, specialty cables, and interconnect kits. The STL manufacturing process is “glass to gigabit,” meaning it creates its own glass preforms, pulls the fiber, and manufactures the final cable.
Designing specialized connectivity for high-bandwidth AI racks
STL manufactures high-density optical products designed for the specific needs of AI data centers, which require “GPU dense, high bandwidth, low latency” connections. This includes high-fiber-count cables (up to 3,456 fibers) and “Intelligent Bonded Ribbon” technology.
The shift toward AI data centers is creating a “once-in-a-generation” opportunity. They are far more fiber-intensive, with GPU-dense racks requiring up to 36 times the fiber of traditional configurations. It is developing advanced technologies such as Multicore Fiber (offering 4-7x higher capacity) and Hollow-Core Fiber (significantly lower latency).
Why the US Market is the key catalyst
The U.S. (North America) is currently STL’s fastest-growing and most strategic market, driven by the AI and data center construction boom. North America is becoming a dominant revenue driver for STL, with its contribution rising from 25% (FY25) to 36% in 9MFY26.
The enterprise and data center business’s contribution to total revenue is expected to increase to 30% over the next 12-18 months, up from 20% currently.
STL has successfully entered the market with Tier 1 North American telecom customers and has secured large-scale data center connectivity orders. To serve this market, it has invested more than $50 million to establish a manufacturing facility in the U.S. It is rapidly increasing production at this site to meet local demand and mitigate import costs.
The ₹5,325 crore order book
The company maintains a robust open order book of ₹5,325 crores, providing strong revenue visibility for the next year. Of this, nearly ₹1,000 crores is scheduled for execution in the very next quarter. STL aims to achieve or exceed its FY26 revenue of ₹5,100 crore, of which ₹3,311 crore has already been achieved in 9MFY26.
North America is projected to be the company’s main growth engine, with the region’s market expected to grow at a 13.7% CAGR through 2030. While EBITDA margins moderated to 10.3% in Q3FY26 due to US tariffs, STL expects margins to improve from Q4. It aims to reach 20% margins in the long term, assuming optimal utilization (70%+) and normalization of tariff impacts.
#2 HFCL: Capturing the North American ‘fiber hunger‘
HFCL has established a significant and growing presence in the United States, fueled by the rapid expansion of data centers and AI infrastructure. Management notes that while India installs approximately 100,000 servers annually, the US installs millions of new servers each year, creating significant demand for optical fiber.
US ‘Fiber Hunger’: Why HFCL is rejecting long-term contracts
Management expects high demand for fiber-optic cables, driven by US data centers and AI consumption, to continue for at least the next 3-5 years. Major US buyers are reportedly seeking three-year commitments to secure HFCL’s manufacturing capacity, though HFCL is hesitant to enter long-term contracts given expectations of better pricing in the future.
Tier 1 Breakthroughs
HFCL has successfully broken into the US market by securing orders from Tier 1 telecom operators, a segment they previously could not access. It won $192 million in export orders for optical fiber cables in Q3FY26. In Q3 FY26, exports accounted for 27% of HFCL’s total revenue, with the US being the primary driver of this export growth.
The ₹1,000 crore target for MPO and rack solutions.
The US data center market requires next-generation, high-fiber-count cables to handle massive data traffic. In response, HFCL has developed cables with high fiber counts (up to 3,456 fibers). HFCL is developing passive connectivity solutions (such as MPO cable solutions for rack-to-rack connectivity) to serve US and global data centers.
Management expects revenue from Passive Connectivity Solutions (including products such as MPO cables for data centers and telecom applications) to grow significantly. Management expects revenue to be around ₹400 crore in FY26, and expects to cross ₹1,000 crore in FY27. This is expected to be driven by the anticipated $1.1 trillion in data center capex by FY29.
#3 Black Box: Moving beyond connectivity to platforms
Black Box offers a range of services in the data center space, grouped into its Global Solutions Integration portfolio, including build-out and execution of physical infrastructure, ongoing operational support, and data center setup. Black Box has made significant operational changes to strengthen its capabilities in this sector.
Management acknowledges that, while hyperscalers have been investing heavily for years, Black Box has “barely scratched the surface” to date. However, they are now confident they are at an inflection point to win significantly larger value orders. It recently concluded a major event in Virginia (described as the data center capital), signaling strong momentum and visibility.
Specialized AI teams and edge synergy
The company has built a specialized Data Center AI services team in the U.S. over the last six months to focus on high-value engagements. A new partnership with Wind River accelerates its ability to deliver solutions for Edge data centers. This moves Black Box into the Platform space (compute & storage), complementing its existing connectivity and network offering.
Pursuing $100 million high-value mandates
The data center business is a key driver for both revenue growth and margin expansion. The company is currently bidding on and expects to win large-value orders totaling $50 million to $100 million in the coming months. Management expects a continued shift in the business mix toward data center and enterprise transformation engagements.
Data Center revenue is reported under the Global Solutions Integration segment. This segment is the company’s largest, contributing 83% of total revenue in H1FY26. The newly announced partnership with Wind River is projected to generate approximately ₹1,350 crore in revenue over the next 5 years.
From cables to platforms: Black Box’s $2 billion ambition
The data center vertical is a key factor underpinning the company’s guidance for a stronger H2 FY26 and its medium-term goal of reaching $2 billion (₹18,000 crore) in revenue by FY29. Data centers remain the largest contributor to the order book, which stood at $555 million (₹5,000 crore) at the end of Q2FY26.
The profitability gap: Valuation vs. Efficiency
Sterlite’s return profile, specifically Return on Capital Employed (ROCE) and Return on Equity (ROE), remains weak due to its current loss-making status, while HFCL’s return metrics are dampened by sub-optimal profitability. Black Box’s return ratios are strong, indicating good efficiency and profitability.
| Peer Comparison (X) | |||||
| Company | EV/EBITDA | 5Y Median EV/EBITDA | Industry EV/EBITDA | ROCE (%) | ROE (%) |
| Sterlite | 15.2 | 11.4 | 19.4 | 2.9 | -6.3 |
| HFCL | 26.0 | 16.6 | 9.6 | 7.6 | 4.4 |
| Black Box | 19.3 | 11.8 | 25.9 | 29.8 | 44.2 |
In terms of valuation, HFCL is trading at a premium to the historical median and industry multiples. Black Box is trading at a premium to the historical median but at a discount to the industry. Sterlite is also trading at a premium to the industry median.
The $650 billion AI capex cycle marks a structural shift in global digital infrastructure. Indian enablers like Sterlite, HFCL, and Black Box sit on different points of the value chain, offering distinct risk-reward profiles. It may be worthwhile to add these stocks to your watchlist and see how they perform in time to come.
Disclaimer
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data was unavailable have we used an alternative, widely used and accepted source of information.
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About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
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