Morgan Stanley Names Reliance Industries Its Top Pick as AI Capex Becomes Next Capital Allocation Pivot
Global brokerage Morgan Stanley has reiterated its bullish stance on Reliance Industries Ltd (RIL), naming it its ‘top pick’ and maintaining an ‘overweight’ rating with a target price of ₹1,803. The target implies a potential upside of 28 percent from Thursday’s closing price, signaling strong conviction in the conglomerate’s next phase of growth.
The optimism stems from Reliance’s ambitious plan to invest ₹10 lakh crore over seven years in artificial intelligence, digital infrastructure, and related energy supply. According to Morgan Stanley, this marks the next major shift in capital allocation for the Mukesh Ambani-led conglomerate — comparable in scale to its earlier transformational bets in telecom and retail.
₹10 Lakh Crore AI Investment Plan Mirrors Telecom and Retail Playbook
Morgan Stanley highlighted that the magnitude of the proposed AI investment mirrors the company’s earlier telecom and consumer push, which reshaped India’s digital landscape. The brokerage believes execution will be partnership-driven, leveraging alliances with global technology leaders to accelerate deployment and optimize returns.
Earlier this week at the India AI Impact Summit, Chairman Mukesh Ambani outlined Reliance’s roadmap to build multi-gigawatt AI-ready data centres, backed by up to 10GW of renewable energy capacity, energy storage systems, and chip infrastructure.
An initial 120MW capacity is expected to go live in the second half of 2026, with progressive expansion in subsequent years.
Ambani described the capital allocation as:
“Patient and disciplined capital aimed at building sovereign compute infrastructure and lowering the cost of intelligence.”
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Capex Scale: $12–15 Billion for First 1GW Phase
Morgan Stanley estimates that the first 1GW phase of AI infrastructure currently under construction could require capital expenditure of approximately $12–15 billion. While the capex scale is substantial, the brokerage emphasized Reliance’s strong cash flow generation capability.
RIL currently generates around $14–15 billion annually in operating cash flows from its existing businesses, providing internal funding flexibility without significantly stretching its balance sheet.
This financial strength positions the company to undertake large-scale infrastructure investments without jeopardizing shareholder value.
Superior Returns Expected Compared to Telecom and Retail
One of the key highlights in Morgan Stanley’s note is the projected return profile of the proposed “intelligence” business. The brokerage expects post-tax return on capital employed (ROCE) of over 12 percent and an implied return on equity (ROE) of nearly 18 percent over five years.
These projected returns are materially higher than what Reliance achieved during the initial years of its telecom and retail expansion.
If executed efficiently, the AI and compute infrastructure vertical could emerge as a higher-margin, capital-efficient growth engine compared to its earlier large bets.
Strategic Shift: From Data Connectivity to AI-Driven Services
Ambani reiterated Reliance’s broader ambition of transitioning from simply connecting India to data, toward delivering AI-driven services at scale. The strategy integrates in-house green energy generation with nationwide edge computing capabilities.
The vertical integration of renewable energy, chip infrastructure, and AI data centres could provide cost advantages and long-term competitive differentiation.
This shift comes at a crucial time, as global technology giants race to build sovereign AI infrastructure across markets.
Jio IPO in Focus as Investors Track Capital Allocation Discipline
The AI capex roadmap arrives ahead of the anticipated IPO of Jio Platforms, Reliance’s telecom and technology arm. Investment bankers had previously valued Jio Platforms at around $170 billion, making it one of the most awaited public offerings in India’s corporate history.
The AI infrastructure buildout could significantly enhance Jio’s valuation narrative by positioning it as a comprehensive digital ecosystem player rather than just a telecom operator.
For investors, capital allocation discipline remains a key focus area. Morgan Stanley’s confidence suggests the brokerage views the AI investment not as reckless expansion, but as a structured long-term value creation strategy.
Stock Performance and Analyst Sentiment
Reliance Industries shares rose 0.9 percent to ₹1,422.20 on Friday. Over the past year, the stock has gained 15.3 percent, outperforming the Nifty’s 11.7 percent rise. The company’s market capitalisation currently stands at approximately ₹19.1 lakh crore.
Analyst sentiment remains overwhelmingly positive. Of the 37 analysts tracking the stock, 35 have issued a ‘buy’ recommendation, underscoring broad institutional confidence.
Here’s What Happened Today and Why Traders Reacted
Markets reacted positively to Morgan Stanley’s endorsement and the clarity around Reliance’s AI capex roadmap. The reaffirmed overweight rating and ₹1,803 target price reinforced investor confidence in long-term growth prospects.
Traders responded to:
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Strong brokerage backing
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Clear capital allocation roadmap
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High projected ROE and ROCE
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Funding visibility through strong cash flows
The stock’s steady gains reflect measured optimism rather than speculative enthusiasm.
What Impact Could This Have on Investors and the Broader Market?
Reliance Industries carries significant weight in benchmark indices, meaning sustained upside could positively influence broader market sentiment.
For long-term investors, the AI pivot represents:
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A structural growth driver
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Diversification beyond telecom and retail
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Potential for higher-margin revenue streams
However, execution risks and capex intensity will remain closely monitored.
If Reliance successfully replicates its telecom playbook in AI infrastructure, the ₹10 lakh crore investment could mark another transformational chapter in India’s corporate growth story.
