Datacenters: The New Investment Theme: Top Stocks poised for mutibagger returns

The Rise of Big Datacenters

Have you heard of the New Zealand-based Weta FX? Think of the movies – Lord of the , Avatar, and Aquaman. Weta FX is the visual effects company rendering these computer graphics intense movies. As of 2024, Weta FX has won seven Academy Awards for best visual effects.

Earlier, the company used its own datacenters for the job. With the intense work that came with the Avatar sequel, that changed. Deploying its own datacenter”would have needed huge infrastructure investments and approvals from the local government. So, the company decided to move to the cloud and rendered the graphics on Amazon Web Services (AWS), the world’s most adopted cloud service offering over 200 services from datacenters globally.

In fact, many of the mindblowing scenes in Bahubali were computer-generated imagery made in a cloud computing industrial park in Karamay, China.

Why This Matters to You

The shift towards big datacenters is becoming a megatrend. In recent years, investment themes like railways, defense, EVs, and green energy have ruled the market. Datacenters could be the next big theme, potentially delivering the next set of multibagger stocks.

Every business needs computing equipment for web applications, customer servicing, selling products, internal management, etc. With the digitalization of the economy, this need has grown exponentially. However, setting up an in-house datacenter requires expertise, budget, and physical space, which many companies cannot afford.

The Solution: Third-Party Datacenters

Third-party datacenters, or colocation datacenters, provide the infrastructure needed without the companies having to build their own. This Infrastructure includes computing, network, storage, power generation, cooling systems, security, fire protection, remote monitoring, backup power, and more.

Companies That Could Benefit from the Rise of Datacenters

Netweb Technologies

Netweb Technologies offers servers, storage, backup, and high-performance computing solutions customized to business needs.

E2E Networks

E2E Networks is a hyperscaler from India focusing on advanced Cloud GPU infrastructure, offering services through third-party datacenters in high-demand areas like Noida, Mumbai, and Vellore.

Cable and Networking Products

Companies in the cable and networking products industry, such as D-Link, Polycab, RR Cables, 3M India, and Havells, could benefit from the demand for medium voltage cables, switches, transformers, and uninterrupted power supply.

Power Generation and Supply

Kirloskar Oil Engines and Cummins India should be on your watchlist for their role in power generation and supply.

Power Backup

Exide Industries offers high-end DC batteries crucial for power backup in datacenters.

Cooling Systems

Bluestar could benefit from the demand for sophisticated cooling systems necessary to maintain controlled environments for electronics.

Real Estate

Anant Raj is investing about Rs 100 bn for a 300 MW datacenter, making it a significant player in the real estate segment focused on datacenters.

Techno Electric & Engineering

Techno Electric & Engineering has plans to develop 250 MW of datacenters, investing over US$ 1.3 bn in the next five to six years.

AurionPro Solutions

AurionPro Solutions has ventured into datacenter building, consulting, and hybrid cloud services, working on projects with the RBI and IITs.

In Conclusion, The companies mentioned here do not imply any specific investment advice. This is not an exhaustive list of the entire datacenter supply chain. While these were some Indian plays, the datacenter theme is still dominated by multinational corporations like Schneider Electric, Eaton, Emerson Electric, Honeywell Automation, Siemens, ABB, and Legrand.

It’s worth exploring their suppliers in India as well.