Global data center spending is projected to reach $2.1 trillion by 2028, fueled by AI. This massive infrastructure shift creates potential opportunities for Indian companies supplying power, cooling, and electrical equipment. Investors should track how domestic players manage the high capital and power requirements of this sector.
Global spending on data centers is forecast to climb to $2.1 trillion by 2028, according to Bank of America projections. For investors, this development signals a long-term infrastructure cycle driven by the rapid integration of artificial intelligence. While much of the initial investor focus has been on global chipmakers, the secondary wave of capital is shifting toward the physical infrastructure required to house and power these advanced computing systems.
The Shift to Specialized Infrastructure
The construction of modern data centers is significantly more intensive than traditional server storage. These facilities, often called neoclouds, require high-density power distribution, massive backup generators, and sophisticated cooling systems to handle the heat generated by AI hardware. For Indian industrial companies, this transition creates a demand for reliable, high-quality components. Manufacturers of switchgear, large-scale generators, electrical transformers, and precision HVAC cooling systems are increasingly finding data center operators to be a growing customer base.
Impact on the Indian Market
India is experiencing a domestic buildout of data center capacity as large conglomerates and global cloud operators compete for market share. As these entities expand their footprint in India, the demand for local supply chains—especially for power and climate control—is rising. Unlike standard commercial construction, data center projects operate under strict uptime requirements, meaning they prefer vendors with a proven track record of reliability. Consequently, industrial companies that can provide integrated power and cooling solutions are well-placed to secure long-term service and equipment contracts.
Risks and Monitorables
While the growth potential is clear, the sector is not without risks. Data center projects are highly capital-intensive, and companies involved in constructing them often carry significant debt. Investors should watch for any signs of rising leverage on balance sheets, as high interest rates can dampen profitability.
Another critical bottleneck is power availability. Data centers are massive consumers of electricity, and securing consistent grid connections is a persistent challenge in many regions. Regulatory approvals for land and electricity can lead to delays in project timelines, which in turn affects the revenue recognition for suppliers. Furthermore, the industry is under pressure to adopt green energy. Suppliers that offer energy-efficient equipment or solutions compatible with renewable energy sources may hold a stronger competitive advantage than those offering legacy hardware.
The primary monitorable for shareholders is order execution. Investors should track order book growth, the ability of companies to execute these projects on time, and margin trends. As the sector matures, competition for infrastructure contracts will likely increase, which could impact the pricing power of suppliers. Future updates regarding the pace of new data center commissioning and government policy on digital infrastructure will be key to understanding the durability of this demand.