Data center stocks are flying - here's why
The $4.5 billion Indian data center market is currently under focus, with several stocks scaling to all time highs.
India's data center space is seeing a seismic shift due to growing internet users, a looming Generative AI revolution, and an IT industry in flux. This has propelled local data center stocks to new heights over the last few months.
Context: India currently ranks 13th globally in operational data centers, with 138 facilities and 45 more expected by 2025.
State of play: the local data center market was valued at $4.5 billion in 2023, and is projected to grow at a CAGR of 10.98% from 2024 to 2032. Growth could very well surprise to the upside by that time, primarily due to:
- Projected 900 million active internet users by 2025, up from the current 759 million
- Expected data consumption of 62GB per user per month by 2028, leading global markets
- Government initiatives supporting digital infrastructure and green data center practices
- Increasing adoption of 5G, IoT, and AI technologies
The government's push for digital infrastructure and the post-pandemic surge in remote work and digital entertainment have further accelerated the need for robust data center services.
In the numbers:
- $14 billion invested in the Indian data center sector over the past five years
- Projected investments to surpass $23 billion by 2025
- Data center capacity expected to reach 1,700 MW by 2025, with demand potentially exceeding 3,000 MW
In focus: Several publicly traded companies are capitalizing on this data center boom, and are scaling to new heights.
- E2E Networks: This cloud infrastructure provider has seen its stock price surge as it expands its data center footprint across India.
- Anant Raj: Originally a real estate developer, Anant Raj has pivoted to data center development, driving investor interest and stock performance.
- Netweb Technologies: As a provider of high-performance computing solutions, Netweb is riding the wave of increased data center demand, reflected in its stock price.
Outside of this, several non pure-play companies such as ABB India, Adani Enterprises, Reliance Industries, Infosys, Bharti Airtel, etc. have benefitted from the industry wide tailwinds.
What to watch: As India's data consumption continues to outpace global markets and the government pushes for data localization, these stocks may see further growth.
However, investors should also keep an eye on potential challenges such as power supply issues and regulatory changes. Expanding valuations are also a risk factor.
Zoom out: India's data center market is at an inflection point, with massive growth potential driving investor enthusiasm. As the country's digital infrastructure expands to meet the needs of its growing internet user base, data center stocks are likely to remain in the spotlight for the foreseeable future.
