The Upstream Power Shift: Why AI Computing Relies on Heavy Engineering
Data centers, the backbone of AI computing, are emerging as one of the largest infrastructure opportunities globally. And this opportunity extends beyond semiconductor companies and across the value chain.
According to industry estimates, global data center capacity could double to nearly 200,000 megawatt (MW) by 2030. This will be driven by tech companies investing billions of dollars to support the growth of AI applications.
But running these facilities requires more than servers and chips. Data centers consume enormous amounts of electricity and generate significant heat. This creates demand for cooling systems, power infrastructure, and natural gas networks.
In the US, developers are pairing data centers with gas-fired power plants for a reliable electricity supply. This has triggered fresh investments across the energy value chain, from gas turbines and heat recovery systems to the pipelines that transport natural gas.
As a result, pipe manufacturers are finding themselves at the center of a multi-year infrastructure cycle. Against this backdrop, this article studies a dominant pipeline manufacturer that captures up to 35% of the US market.
This company is actively fueling the AI boom by dedicating its US pipe production directly to gas-powered data centers. Likewise, another company is supplying piping solutions needed for data center cooling and for gas turbines. Now, let’s dig deeper into how both these players are positioning themselves to benefit from the data center opportunity.
#1 Welspun Corp: Resolving Grid Bottlenecks Across North American Tech Hubs
Welspun Corp manufactures a wide variety of pipes, steel products, and water storage solutions. The company has a global presence across India, the US, and Saudi Arabia. The company is among the top three line pipe manufacturers globally. This pipe is essential for the transportation of oil and gas. Welspun holds 33%-35% of the US line pipe market.
The Captive Grid: Connecting Natural Gas Infrastructure to AI Hubs
Data centers are power guzzlers, and national grid reliability can sometimes be poor. As a result, these facilities often require their own power plants to ensure an uninterrupted power supply. These dedicated power plants rely heavily on natural gas, creating demand for new connecting natural gas pipelines.
This has triggered a strong surge in the construction of new connecting pipelines. Here, it supplies the large-diameter pipes necessary to build this infrastructure, placing Welspun directly in the AI data center value chain.
Management expects more than 5,000 data centers to come up across America. This represents a long-term structural shift that will require pipeline infrastructure for the next 5 to 7 years. Management expects it to provide strong, multi-year visibility into demand.
Visibility Through FY28: Structural Backlogs in the North American Energy Grid
This surge in pipeline construction is precisely why Welspun’s US spiral mill is fully booked through FY28. Welspun’s management has stated that demand is so concentrated that all the pipes the company currently produces in the US are being used exclusively either to carry gas to power AI data centers or to supply LNG exports.
Welspun is securing these orders with premium customers, dealing exclusively with the top two or three midstream companies in the American economy. To capture more of this market, Welspun is bringing two new U.S. facilities online. The new High-Frequency Induction Welding (HFIW) plant is scheduled to launch by the end of Q1.
A new large-diameter LSAW plant is expected to be operational by the end of 2026. The company is already securing orders for these upcoming capacities. Both plants are expected to contribute to top-line and margin in FY27. Their full impact will be realised in FY28.
Earnings Momentum: Surpassing the FY26 Guidance Baseline
Welspun delivered strong financials in FY26. Revenue increased 20% year-on-year to ₹16,770 crore. EBITDA surged 28% to a record ₹2,371 crore, comfortably surpassing the management’s full-year guidance of ₹2,200 crore. Adjusted net profit (without exceptional items) jumped 42% to ₹1,613 crore.
The company’s consolidated order book stands at an all-time high of ₹25,350 crore, providing revenue visibility for the next year. Welspun has guided to reach ₹20,000 crore in revenue and ₹2,850 crore in EBITDA (a 20% growth over FY26 actuals) in FY27.
Welspun Share Price is up 72% in 2026 YTD
#2 DEE Development Engineers: Capitalizing on Global Gas Turbine Backlogs
DEE Development Engineers (DDEL) is a leading engineering solutions provider specializing in comprehensive process piping and heavy engineering services. The Piping Segment is the company’s core business, while the Power Generation segment is the non-core operation.
The company designs, engineers, and manufactures pre-fabricated piping products, pipe spools, industrial pipe fittings, induction pipe bends, modular piping (plug-and-play skids), and pressure vessels. DDEL serves a marquee global clientele across industries, including Oil & Gas, Thermal and Nuclear Power, Petrochemicals, Chemicals, and Infrastructure.
It is India’s largest player in process piping solutions by installed capacity, boasting 93,500 metric tonnes per annum (MTPA) in piping and 32,400 MTPA in heavy fabrication. As part of its “Vision 2030” strategic roadmap, it has identified data centers as a major emerging high-growth segment.
The Cooling Moat: Capitalizing on the Data Center Power Race
Data centers require extensive cooling infrastructure to keep server racks operating at optimal temperatures, as they generate significant heat. To support these cooling systems, DDEL supplies rigid and metal piping solutions. These solutions cater to chillers and thermal management networks inside data centers.
The size of the opportunity is substantial. Global data center capacity is projected to double to 200,000 MW by 2030. DDEL’s internal management estimates that every 25 MW of data center capacity requires approximately ₹25 crore in specialized piping. This translates into a vast addressable market for the company’s core engineering products.
This segment is currently in its early stages for the company. DDEL has received several direct inquiries from data center developers and is awaiting orders. In addition, to meet this surging power demand, there is a massive backlog of orders for new gas turbines from major global players such as GE, Siemens, and Mitsubishi.
Plant Reservation Arbitrage: Locking In Pure Job-Work Cash Flows
These gas turbines rely heavily on Heat Recovery Steam Generator (HRSG) systems. This, in turn, requires highly specialized alloy piping to function. DDEL’s Thailand facility is directly stepping in to supply this specialized HRSG piping to these global OEMs. It boasts a fabrication capacity of 14,500 MTPA.
Margin Protection: Why Capacity Reservation Limits Concentration Risk
As the demand is strong, major customers are pushing to pre-book DDEL’s manufacturing plant. DDEL has officially agreed to reserve 60% of the Thailand facility’s capacity (approximately 8,700 tons) exclusively for Nooter Eriksen, a major international player. It strategically capped this at 60% to avoid concentration risk and work with other players like Siemens and GE.
This 60% capacity block means an annual revenue of roughly ₹150 crore. This revenue will come from pure job work (essentially gross profit, since the client provides the raw materials). As a result, management expects the EBITDA margins on this ₹150 crore will be higher than 20%.
Core Margin Expansion vs. Non-Core Operational Drag
Coming to its FY26 financials, revenue rose by 38% to ₹1,142 crore, driven by 46% growth in the core business. EBITDA surged by 52.9% to ₹189.3 crore, while margins expanded by 160 bps to 16.6%, dragged down by EBITDA loss in non-core business. The core business EBITDA was 82% higher, while margin grew by 360 bps to 18%.
Net profit grew by 76.9% to ₹77.2 crore. As of 31 May 2026, the order book stood at ₹2,434 crore, providing revenue visibility of around 2 years. Looking into FY27, DDEL anticipates over ₹2,000 crore in new order inflows. DDEL has projected a revenue target of ₹1,500 crore for FY27.
Leverage Headwinds: Managing the 3.8X Debt-to-EBITDA Exposure
Volatility in raw material prices (steel and metal alloys), supply chain disruptions, and delays in capacity utilization are some of the major risks. High leverage, with net debt-to-EBITDA at 3.8X, is another risk. While major capital expenditure is now complete, the aim is to gradually reduce it using free cash flow.
DDEL Share Price Up 215% in 2026 YTD
Piping Valuations: Analyzing the Sector Premia and Returns
Welspun’s Return on Capital Employed (ROCE) and Return on Equity (ROE) are strong due to superior growth and execution. On the other hand, DDEL’s return ratios are moderate due to recent capacity additions. However, they are expected to improve as utilization increases.
In terms of valuation, after a sharp re-rating in 2026, both are now trading at a premium to the industry and their historical median.
| Peer Comparison (X) | |||||
| Particulars | Price-to-Earning Multiple | Return Ratios | |||
| Company | 3Y Median | Industry | ROE (%) | ROCE (%) | |
| DDEL | 60.3 | 36.9 (2Y) | 31.3 | 9.3 | 10.9 |
| Welspun | 23.1 | 15.2 | 22.0 | 19.4 | 22.9 |
The AI data center boom is creating opportunities far beyond chipmakers. DDEL is targeting the cooling and power infrastructure within data centers, while Welspun is supplying the pipelines needed to feed gas-fired power plants that support them.
Both are seeing strong order visibility, but their stocks have already witnessed sharp re-ratings. The next phase of returns will likely depend less on the AI narrative and more on execution, capacity utilization, and the ability to convert future demand into profitable growth. Capex slowdown linked to data centers remains the key risk.
As strong contenders, these stocks are worth keeping on your watchlist.
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.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
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