Hitachi Energy: AI Data Centres Drive 90% Profit Surge

Introduction

Hitachi Energy India is shifting its focus towards a new, power-intensive growth driver: Artificial Intelligence (AI)-ready data centres. The company's leadership has identified the explosive growth in AI-led computing as a significant opportunity that reshapes electricity demand and grid complexity. This strategic pivot is already yielding substantial results, as evidenced by the company's stellar performance in the December quarter, where net profit surged by over 90%.

The Unprecedented Energy Demand of AI

The core of this new opportunity lies in the unique energy profile of AI data centres. According to N Venu, Managing Director and CEO of Hitachi Energy India, these facilities consume far more energy and require greater grid flexibility than their conventional counterparts. An AI-ready data centre can escalate its power consumption from 100 megawatts to 250 megawatts in mere seconds, creating sudden load spikes that traditional grids are not equipped to handle.

Venu highlighted that a single query on an AI platform like ChatGPT consumes six to eight times more energy than a standard Google search. This exponential increase in electricity consumption underscores the massive infrastructure upgrades needed as AI adoption becomes widespread. While AI can be used to optimize energy systems, the net effect is a significantly higher overall demand for power.

India's Emerging Role in the Data Centre Market

Currently, the global landscape for AI-ready data centres is dominated by the United States and China, which host nearly 90% of these facilities. However, Venu expressed confidence that India is poised to become a major player in this sector. This optimism is supported by rising domestic demand and favorable government policies.

The Union Budget's provision of tax holidays for Indian-made data centres until 2047 is a significant incentive expected to accelerate investment in this area. For Hitachi Energy, this translates into a substantial addressable market, estimated to be around 10-15% of a data centre's total capital expenditure. This includes providing essential grid connections, conducting power system studies, and supplying advanced transmission technologies.

A Strategic Pivot Backed by Strong Financials

Hitachi Energy's focus on data centres mirrors its earlier strategic bet on high-voltage direct current (HVDC) technology. Venu drew a parallel, noting that the company invested in HVDC years ago when its potential was not widely recognized, and today it has a clearly visible project pipeline. Data centres are viewed as the next major long-term opportunity.

This strategy is strongly supported by the company's recent financial performance. The strategic diversification is already reflecting in the company’s numbers.

The company's order backlog stands at nearly ₹30,000 crore, providing robust revenue visibility for the coming quarters.

Building a Sustainable and Profitable Model

Regarding profitability, Venu stated that the company has been consciously building a sustainable growth model for several years. This involves diversifying beyond traditional power transmission into sectors like industries, services, digital solutions, and now, data centres. While declining to provide specific forward guidance, he reiterated the company's commitment to maintaining double-digit operating margins.

Managing Market Risks and Competition

Hitachi Energy has also taken proactive steps to mitigate risks associated with market volatility. More than 70% of its portfolio is covered by price escalation clauses, which allow the company to transparently pass on changes in raw material costs to customers. This strategy insulates it from commodity price fluctuations.

On the subject of potential competition from Chinese firms re-entering Indian power equipment tenders, Venu acknowledged the possibility but downplayed its immediate impact. He argued that the demand in the Indian market is so vast that the entry of one additional manufacturer would not materially alter the competitive landscape. Furthermore, Hitachi Energy's high degree of localisation, with over 80% of its production being local, serves as a key competitive advantage.

Conclusion: Powering the Future of AI

As AI adoption continues to accelerate, power systems will face unprecedented stress from data-intensive workloads. Hitachi Energy is positioning itself at the critical intersection of AI, energy, and grid infrastructure. The company's strategy is not just about supplying more power; it is about developing smarter, more flexible grids capable of meeting the dynamic demands of the future. This convergence is set to define the next phase of growth for both Hitachi Energy and India's broader power equipment sector.