Morgan Stanley Sees AI As Reliance Industries’ Most Underrated Growth Engine

Artificial intelligence could emerge as the next big growth pillar for Reliance Industries, according to Morgan Stanley, which believes the opportunity is still not fully reflected in the stock’s valuation.

In a recent note, the global investment firm said that powering artificial intelligence (AI) is shaping up to be one of the most underappreciated verticals within Mukesh Ambani-led Reliance Industries. Over time, this business could significantly alter how investors view the company.

Morgan Stanley analysts, led by Mayank Maheshwari, pointed to recent remarks by Reliance’s chairman and policymakers to argue that AI-related infrastructure could contribute as much as 15% to Reliance’s net asset value over the long term. The firm sees this as a meaningful value driver over the next decade.

Why Morgan Stanley Sees AI As A Game-Changer?

The brokerage firm believes AI infrastructure offers strong economics at scale. It estimates returns on capital employed of around 12% to 14%, supported by Reliance’s partnerships with global technology leaders such as Meta, Google and Microsoft.

These alliances, combined with plans to build large data centres powered by low-cost renewable energy and backed by in-house battery solutions, place Reliance in a favourable position. According to the report, the company has a track record of reinventing itself every decade, and AI could be the next phase in that journey.

Morgan Stanley added that generative AI allows Reliance to deploy capital at scale while unlocking synergies across its energy, digital, consumer and media businesses.

The brokerage retained Reliance Industries as a top pick, maintaining its overweight rating and price target of ₹1,803. This suggests a potential upside of about 24% from the February 6 closing price of ₹1,451.

How Big Is Reliance’s AI Infrastructure Ambition?

At the heart of Morgan Stanley’s thesis is a capital-intensive push into hyperscale computing. The brokerage estimates that Reliance could invest $12 to 15 billion to build a 1-gigawatt AI-focused data centre.

Around 25% of the computing capacity is expected to be used directly by Reliance. The remaining 75% could be offered as a data centre as a service to hyperscalers and large AI model developers. This portion alone could generate annual revenues of $1.5 to 1.6 million per megawatt.

For a 100-megawatt block, Morgan Stanley’s model estimates revenues of $822 million and earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $743 million, with attractive margins and returns, even before accounting for tax incentives.

What Role Do Policy Support And Energy Play?

The brokerage noted that the policy environment is unusually supportive. India’s recent budget announced a 20-year tax holiday for hyperscalers, while graphics processing unit (GPU) sourcing from the US under the India-US trade framework adds another tailwind.

In terms of scale, Morgan Stanley estimates India will need around 9 gigawatts of AI data centre power by 2030, compared with 48 gigawatts in China and more than 100 gigawatts in the US.

Reliance’s integrated energy and new-energy businesses are expected to play a key role in this build-out. The report highlighted growing demand for energy storage systems as grid constraints and equipment shortages push data centre operators toward faster, more flexible power solutions.

On the consumer side, the brokerage also pointed to the Google–Reliance partnership, which will offer Jio users access to advanced AI tools at affordable prices. Combined with strategic tie-ups with Meta, Google and Microsoft, Morgan Stanley believes Reliance has lowered both technology and execution risks as it scales its AI ambitions.

Sources:

The Economic Times

ET Telecom