Datacenters: The New Gold. Here's a List of Stocks that Could Help You Strike it Rich

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Have you heard of the New Zealand based Weta FX?

Think of the movies - Lord of the Rings, Avatar, and Aquaman.

Well, 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 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). AWS is 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.

So why should this information interest you?

Well, it's a theme that is on its way to becoming a megatrend - The Rise of Big Datacenters.

In recent years, the investing space have been ruled by big themes - railways, defense, EVs, green energy, to name a few. I wouldn't be surprised to see the datacenter theme deliver next set of multibagger stocks.

So, it's high time we understand the business.

You see, every business needs computing equipment for its web applications, customer servicing, selling products, internal management etc.

With digitalisation of the economy the need for this set up has grown exponentially. To do this all in-house needs expertise, a budget, and physical space, which is not possible for many companies.

The solution? Third party datacenters. Rent it instead of building your own. So apart from on premise captive data centers, colocation data centers are on the rise.

The infra for a datacenter would be computing, network, storage, power generation, cooling systems, security requirements, fire protection, remote monitoring, backup power, and so on.

Companies that Could Benefit from the Rise of Datacenters

The first is Netweb Technlogies. It offers servers, storage, backup, and high performance computing solutions that customise the right technology to the business' needs.

E2E Networks is a hyperscaler from India. It focuses on advanced Cloud GPU (graphic processing unit) infrastructure. It offers its services through third party data centers located at some high demand areas - Noida, Mumbai, and Vellore.

Now large data centers could be the size of entire city blocks. The power needed to run these could charge an entire town.

This creates demand for medium voltage cables, switches, transformers, and uninterrupted power supply.

As such, companies in the cable and networking products industry like D-Link, Polycab, RR Cables, 3M India, Havells etc. could benefit.

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

For the power backup for data centers, Exide Industries offers high end DC batteries.

Now with huge demand of power comes the need for sophisticated cooling systems. You see, a controlled environment for humidity to protect the electronics is vital. Bluestar could be a potential beneficiary.

Let's not forget the need for physical space. Anant Raj is a play in the real estate segment that is betting big on datacenters. The company is investing about Rs 100 bn for a 300 MW (megawatt) datacenter.

Techno Electric & Engg is another company to keep an eye on. It forayed into the data center industry in FY21. It has plans to develop 250 MW of data centers by investing over US$ 1.3 bn in next five to six years.

AurionPro Solutions has ventured into data center building, consulting, and hybrid cloud services. The company does complex design work and has worked on data center projects with the RBI and IITs.

Do note that none of the companies mentioned here imply any view on the stock.

Further, this is not an exhaustive list of the entire data center supply chain.

While these were some Indian plays, the data center theme is still dominated by MNCs like Schneider Electric, Eaton, Emerson Electric, Honeywell Automation, Siemens which has an India arm as well, ABB, Legrand and so on.

As such, it would be worth it to explore their suppliers in India as well.

I'll share more on this in the upcoming issues.

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Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)