Key facts
- Sterlite Technologies and HFCL shares surged up to 5% on Friday, recovering from a prior two-day decline.
- The rebound is linked to a global recovery in technology stocks and increased optimism in equity markets.
- India's data center industry is experiencing significant growth, driven by digitalization and AI demand, benefiting companies like Sterlite Tech and HFCL.
- Sterlite Technologies secured a $1 billion order from a US hyperscaler, strengthening its position in AI data centers.
- HFCL reported a substantial turnaround in its March quarter, with revenue nearly doubling and profit swinging to positive territory.
Shares of Sterlite Technologies and HFCL experienced a significant rally on Friday, climbing up to 5%, marking a recovery after a two-day decline. This surge was propelled by a broader rebound in global technology stocks and a more optimistic market sentiment, influenced by easing geopolitical tensions and a dip in oil prices.
The positive shift in market mood followed comments from U.S. President Donald Trump regarding a potential peace deal with Iran. This risk-on sentiment saw technology-linked stocks, including those on the Nasdaq Composite, rebound sharply after a recent sell-off that had raised concerns about the sustainability of the artificial intelligence rally.
Both Sterlite Technologies and HFCL are identified as direct beneficiaries of India's burgeoning data center industry, which is undergoing a multi-year growth phase driven by accelerating digitalization, increased cloud adoption, and rising demand for artificial intelligence. Sterlite Technologies, a significant player in optical fiber cable manufacturing, has seen its stock soar, with analysts at CLSA maintaining an 'Outperform' rating and a target price of Rs 655, citing a $1 billion order win from a US hyperscaler. This order is expected to bolster the company's position in AI data centers and enhance its medium-term growth visibility.
HFCL has also demonstrated strong performance, with its March quarter marking a significant turnaround. Revenue nearly doubled year-on-year, and the company swung to a profit after tax from a previous loss. Analysts note a fundamental shift in HFCL's business character, with product revenue increasing its share in the mix and exports growing substantially. Beyond optical fiber cables, HFCL is expanding into defense and aerospace and is scaling up its data center interconnect solutions business. The company is also increasing its optical fiber cable capacity and implementing backward integration to reduce raw material costs.
Nomura reports that India's data center IT load has grown substantially, outpacing global growth rates and increasing India's share of global data center capacity. This expansion underscores the significant investment theme that is benefiting companies like Sterlite Tech and HFCL.