- Morgan Stanley upgrades Reliance to an "overweight" rating with a Rs 1,803 target – a 28% upside.
- RIL plans to spend Rs 10 lakh crore (≈$120 bn) on AI, digital infrastructure, and green energy over seven years.
- The first 1 GW AI‑ready data‑centre phase may need $12‑15 bn of capex, funded largely by existing operating cash flow.
- Projected post‑tax ROCE >12% and ROE ~18% – materially higher than past telecom or retail bets.
- Peers like Tata and Adani are already accelerating their own digital‑energy plays, intensifying competition.
You’re overlooking the AI wave that could catapult Reliance into a new earnings era.
Why Reliance’s Rs 10 Lakh Crore AI Bet Is a Game‑Changer for Indian Tech
Morgan Stanley’s fresh endorsement hinges on a strategic pivot: a massive allocation to artificial intelligence, data‑centre capacity, and renewable power. The scale mirrors Reliance’s earlier telecom‑consumer roll‑outs, but the economics are projected to be stronger. A post‑tax return on capital employed (ROCE) north of 12% signals that each rupee of investment could generate more profit than the historic 8‑9% seen in its telecom arm, Jio, or the retail venture Future Group.
At a high‑level, the plan targets three pillars:
- AI‑ready data centres: Multi‑gigawatt facilities designed for low‑latency, high‑throughput workloads.
- Green power supply: Up to 10 GW of renewable energy plus storage to keep the compute stack carbon‑neutral.
- Chip & edge infrastructure: Partnerships with global silicon leaders to embed AI chips at the network edge.
Because the capital is drawn largely from operating cash flow—about $14‑15 bn annually—Reliance avoids dilutive financing, preserving shareholder value.
How the AI Push Reshapes the Energy & Telecom Landscape
Reliance’s roadmap directly links AI compute to its existing energy and telecom businesses. The second‑half‑2026 target of 120 MW of renewable‑backed capacity is the first brick in a larger 10 GW wall that will power data‑centre clusters across India. By pairing power generation with edge‑computing, the group can offer bundled services: connectivity, compute, and clean energy—all under one roof.
This vertical integration reduces dependency on third‑party power suppliers, lowers operating costs, and creates a defensible moat. In a market where telecom margins are thin (averaging 5‑6% EBITDA), the higher‑margin AI services—projected to command 20‑30% EBITDA—could lift the conglomerate’s overall profitability.
Competitor Response: Tata, Adani, and the Race for Digital Infrastructure
Reliance is not alone in courting the AI‑data centre space. Tata Group has announced a $5 bn plan to build a network of green data centres under Tata Communications, while Adani Energy is expanding its renewable portfolio with a focus on powering large‑scale compute clusters.
Both peers are leveraging their own strengths: Tata’s global enterprise customer base and Adani’s massive renewable pipeline. However, Reliance’s advantage lies in its integrated telecom network (Jio) and its deep‑pocketed cash flow. Investors should watch the timing of each competitor’s roll‑out—early‑stage advantage could translate into market‑share leadership in AI‑as‑a‑service.
Historical Parallel: From Telecom to Retail – What the Past Teaches About Capital Shifts
Reliance’s previous capital allocation cycles provide a useful lens. In 2016, the group poured over $20 bn into telecom, turning Jio from a greenfield entrant to the country’s largest data‑user within 18 months. The subsequent retail push (Future Group acquisition) delivered mixed returns, averaging 7‑8% ROCE.
The key takeaway: when the investment aligns with a disruptive technology that reshapes consumer behavior (mobile broadband then, generative AI now), the upside is exponential. The AI play appears to fit that pattern—high‑growth, platform‑level impact, and cross‑industry relevance.
Technical Corner: Decoding ROCE, ROTE, and AI‑Ready Data Centres
Return on Capital Employed (ROCE): Measures profit generated per rupee of capital used. A >12% ROCE indicates efficient use of capital compared with the corporate average of ~9%.
Return on Equity (ROE): Net income divided by shareholders’ equity. An ~18% ROE suggests strong earnings generation for investors.
AI‑Ready Data Centre: Facility built with high‑density power, advanced cooling, and AI‑optimised hardware (e.g., GPUs, TPUs). These centres can handle workloads like large‑language models, autonomous‑vehicle training, and real‑time analytics.
Investor Playbook: Bull vs. Bear Scenarios
Bull Case:
- AI‑centric services capture a growing share of enterprise spend, driving double‑digit revenue CAGR.
- Renewable power cost curve falls, improving margin on compute services.
- Strategic partnerships with global chipmakers accelerate technology adoption, keeping Reliance ahead of Tata and Adani.
- Jio Platforms IPO valuation validates the market’s appetite for a tech‑heavy conglomerate, providing an additional catalyst.
Bear Case:
- Capital deployment overruns the $12‑15 bn estimate, pressuring cash flow.
- Regulatory bottlenecks delay renewable‑energy licences, inflating power costs.
- Global chip shortages or geopolitical tensions hamper partnership execution.
- Competitors launch cheaper, government‑backed cloud alternatives, eroding pricing power.
In the near term, the stock’s 0.9% intraday lift suggests market absorption of the news, but the real inflection point will be the first operational AI‑ready data centre in 2026. Investors with a 3‑5‑year horizon should weigh the upside of a 28% price target against execution risk, and consider position sizing accordingly.