India’s Picks & Shovels AI Stocks

California Gold Rush of the 1840s & 1850s provided an important insight to the investors which has come to be dubbed as investing in “picks & shovels” stocks. During the gold rush, companies that produced and sold essential tools and accessories required by the hordes of miners turned in handsome profits regardless of the success or failure of mining. Levi Strauss is a famous example of having created durable denim work pants to be worn by the miners, a product that gave birth to a long lasting and successful business enterprise.

If the gold rush spawned its own pick & shovels companies in the 19^th century, what could be the prevailing megatrend that is likely to give rise to such companies? Some of the most profitable companies that are straddling the globe today are pioneers of the AI revolution. For instance, Nvidia, the leading AI chipmaker boasts of a market capitalisation of $5 trillion, which is more than the GDP of every single country in the world, except two! In India, when it comes to AI, we certainly are not in the same league as the US and China. But as the Economist (London) observes: “Artificial intelligence (AI) is taking off in India. The country is now the second-largest market for OpenAI, whose ChatGPT service has 700m active users worldwide. Anthropic, another AI startup, also counts India as its second-largest market by usage. That reflects not just India’s huge population but also its appetite for new technology. According to BCG, a consultancy, 92% of Indian office workers regularly use AI tools, compared with 64% in America”. No wonder, Open AI has decided to offer its base version of ChatGPT free for one year from 4^th November, 2025. This growing market for AI applications is throwing up opportunities to invest in picks & shovels stocks supporting the AI revolution. Consider GCCs (Global Capability Centres) that provide essential talent pool to support advances in AI and data centres that provide the infrastructure required to run its applications. Data centres aren’t small server rooms; they’re sprawling facilities, housing racks upon racks of GPUs working round the clock to train large language models – the kind of technology that powers ChatGPT. So, India’s biggest business houses and global tech giants are already staking their claim. Reliance, Adani, Airtel, TCS, Tech Mahindra, and even Google are committing billions to build massive data centres and set up AI infrastructure here. These centres call for uninterrupted power supplies and backup systems because a blackout can cripple operations. They need advanced cooling systems because GPUs generate enormous heat. They need physical space – acres of it – to house these giant facilities and they also need cables, switches, and transformers to keep the data and electricity flowing. So, behind the scenes, the companies that quietly supply the tools, hardware and infra could be the new winning “picks & shovels” stocks of this disruptive AI trend.

Of course, picking winners is a risky game in any situation, since there are far too many variables to contend with. But there is no harm is scouring the horizon for likely emerging winners in this new game. Take Netweb Technologies, a relatively young company. It has, of late run up too sharply, too fast. But it still holds a credible growth story. As of Q1 FY26, the company has installed over 500 supercomputing systems, 50 Private Cloud and HCI (Hyperconverged Infrastructure) systems, and 5,000 accelerator/GPU-based AI systems and enterprise workstations. It offers HPS (High Performance Storage) solutions with a throughput storage of up to 450 GB/s. It was involved in the implementation of the Kabru supercomputer (India’s second-fastest supercomputer) and the PARAM YUVA II (India’s fastest supercomputer), and is participating in the National Supercomputing Mission of the Government of India. 

One could also look at E2E Networks, a homegrown cloud provider specializing in GPU infrastructure, offering services out of key hubs like Noida and Mumbai. Without such services, the AI revolution would stall. Then there’s the power story. Running a large data centre requires huge amount of power, so much power that it could light up a small town. This naturally boosts demand for many products – cables, switches, transformers, and voltage gear. Companies like Polycab, Havells, RR Kabel, D-Link, and 3M India have a direct line into this growth. Backup generators? That’s where Kirloskar Oil Engines and Cummins India come into play. For battery backup, Exide is positioning itself in the high-end DC segment. Cooling is another overlooked but critical piece. Keeping racks of GPUs at safe operating temperatures isn’t easy in Indian summers. Bluestar, with its expertise in precision cooling, stands to benefit as data centres mushroom. Even real estate players are turning this trend into opportunity. Anant Raj, for example, is a beneficiary, suggesting how the property business is being reshaped by AI infrastructure. And not to forget the kingpin of chips – Nvidia. GPUs are the beating heart of AI. Nvidia’s dominance here is so complete that even China has accused it of anti-competitive practices. While Nvidia itself isn’t listed in India, many Indian firms are closely linked to it, either as distributors, partners, or integrators. A promising company in this space is Rashi Peripherals. The company recently concluded a massive Rs 15 billion order from Yotta Infrastructure to supply servers and components for one of India’s first large AI data centres. Beyond such institutional projects, Rashi has another growth lever: it is the bridge between global brands like Nvidia, Intel, ASUS, HP and the Indian consumer market. As AI-powered PCs begin rolling out in India, distributors like Rashi could be the quiet beneficiaries.

While the above cogitations might suggest that AI isn’t just about algorithms or fancy applications but also about a new digital infrastructure being built brick by brick, server by server, transformer by transformer, there are also sectors out there which could benefit substantially by harnessing AI. The sector that stands to benefit the most is BFSI (Banking, Financial Services & Insurance). Banks, Stock Exchanges, Depositories and a whole host of financial service providers could improve reach, speed of execution, productivity and quality of service with AI applications, Generative AI and Agentic AI. Same would be the case with consulting and legal outfits. Insurance companies are already deploying AI in underwriting, claims processing and optimising risk management. For a prescient investor the trick is to identify candidates who are, or likely to be most successful in reaping gains by harvesting AI.

A note of caution is, however, called for. While for the most part picks & shovels stocks are likely to be immune from the progress or otherwise of the AI revolution, their fortunes to some extent, are likely to gyrate along with the tortuous path AI is likely to traverse. The path to success has seldom been smooth. Some analysts are already apprehending an AI bubble with some well-known AI or Associated stocks sharply down from their 52 week highs. CoreWeave is down 60%, Super Micro Computer about 50%, Oracle some 40% and Soft Bank, which is investing heavily in Open AI down about 25%. And now there is “The Big Short” called out on X by the redoubtable Michael Burry who has pointed out that hyperscalers like Amazon, Microsoft and Oracle are inflating profits by understating depreciation on chips and servers. By depreciating these assets over 5 to 6 years instead of a realistic time span of 2 to 3 years, the hyperscalers will collectively understate depreciation by $ 176 billion from 2026 to 28. Burry points out that in 2024, Nvidia has announced that it will design new AI chips every year, instead of every two years. The older chips might not earn top dollar, forcing hyperscalers to constantly upgrade to stay competitive. The slip between the cup and the lip is not unusual in the world of investment. The only defence against such slips is uncompromising diligence and eternal vigilance.