Cables and Cooling Bring AI Windfall to Indian Suppliers

The news that Indian suppliers are cashing in on the global artificial intelligence boom has been met with a mix of excitement and trepidation. Companies like Sterlite Technologies and HFCL are reaping windfalls from supplying cables, power systems, and cooling equipment to data centers.

At first glance, this trend seems like a classic “picks and shovels” trade, where selling tools during a gold rush can earn more than searching for the precious metal. Indian manufacturers are well-positioned to benefit from the AI infrastructure build-out, which is driving demand for their products. The country’s enthusiasm for adopting AI while struggling to develop competitive models raises questions about its long-term prospects in the global tech landscape.

Fund manager Prateek Nigudkar noted that India doesn’t need to make chips or train models to benefit from the data center boom. However, this means the country remains dependent on imported advanced semiconductors and vulnerable to disruptions in global supply chains.

The impact of generative AI on India’s $315 billion IT services industry is another pressing concern. As tasks such as customer service and app maintenance become increasingly automated, many worry about potential job losses and a decline in competitiveness. The benchmark Nifty 50 has taken a hit, down around seven percent in 2026, with foreign investors pulling out over $27 billion from Indian equities.

Despite these risks, Indian executives remain optimistic, citing domestic demand as a safeguard against any slowdown abroad. With nearly a fifth of the world’s data hosted locally but less than five percent of global data-center capacity, there is room for growth. US hyperscalers have committed over $57 billion to new Indian capacity in just the past year, and conglomerates like Adani and Reliance are investing heavily in digital and infrastructure projects.

However, concerns about energy consumption and opposition to data center development pose significant challenges. Analysts warn that valuations have become stretched, and growing resistance to large-scale energy-guzzling projects could hurt sentiment in the near term. Indian companies must navigate these hurdles while maintaining momentum.

Companies like Sify Infinit Spaces are addressing environmental concerns by adopting closed-loop water cooling systems. However, as CEO Sharad Agarwal noted, “We are talking about big investments… Then only we can go and grow.” The data center boom in India has created a double-edged sword: while it presents opportunities for growth and profit, it also poses risks of disruption and job loss.

As the industry continues to evolve, striking a balance between meeting demand for AI infrastructure and mitigating its negative consequences will be crucial. Will India’s data center sector manage this delicate dance, or will it succumb to the challenges ahead? Only time will tell.