AI applications, data centres and EVs to drive India's next capex cycle: ICICI Securities

India’s investment cycle is expanding beyond traditional capital-intensive industries, with sectors like artificial intelligence (AI) applications, data centers, electric vehicles (EVs), and green energy expected to lead the next phase of corporate spending, according to Vinod Karki, Head-Strategy at ICICI Securities. Karki noted that while India lacks the scale of AI infrastructure spending seen in the US—where AI data centers and computing capacity are major growth drivers—the country is well-positioned to benefit from AI adoption and commercialization. Investments in AI applications, particularly by IT services companies, telecom firms, and industrial businesses, are accelerating, supported by growing demand for data centers to meet rising digital infrastructure needs. Corporate capital expenditure in India reached nearly ₹13 trillion in FY26, marking a 14% year-on-year growth. This revival is no longer confined to utilities, industrials, and metals but now includes sectors like healthcare, auto ancillaries, and discretionary consumption, despite their lower historical capital intensity. Data centers are emerging as a key investment theme, with listed companies either announcing new projects or positioning themselves within the ecosystem through equipment and service offerings. Karki also highlighted the role of global capability centers (GCCs) and green energy in driving future corporate spending, alongside strategic government focus on self-reliance in critical sectors like energy, power, and defense. However, he cautioned that capex growth may moderate due to fiscal pressures, including potential increases in food and fertilizer subsidies amid weather-related risks. The government’s emphasis on strategic sectors is expected to remain intact, ensuring sustained investment in areas vital to national resilience.