Morgan Stanley bullish on Reliance Industries, flags AI capex as next capital allocation pivot; sees 28% upside

Reliance Industries Ltd

• Morgan Stanley names Reliance Industries its top stock pick
• RIL plans Rs 10 lakh crore AI investment over seven years
• Brokerage sees 28 percent upside, maintains 'overweight' rating

Did our AI summary help?

Morgan Stanley has named Reliance Industries Ltd its ‘top pick’ and reiterated its bullish stance on the stock, citing the group’s plan to invest Rs 10 lakh crore in artificial intelligence. The global brokerage has reiterated its ‘overweight’ rating on RIL shares with a target price of Rs 1,803, implying an upside of 28 percent from Thursday’s closing price.

In a note, Morgan Stanley said RIL’s plan to invest Rs 10 lakh crore over seven years in AI, digital infrastructure and related energy supply marks the next major shift in capital allocation. The scale of the proposed investments mirrors that of its earlier telecom and consumer push. The brokerage expects execution to be driven largely through partnerships with global technology players, building on existing alliances.

Earlier this week, Reliance Industries Chairman Mukesh Ambani outlined the group’s AI investment roadmap spanning multi-gigawatt AI-ready data centres, supported by up to 10GW of renewable energy capacity, energy storage and chip infrastructure. An initial 120MW of capacity is expected to come on stream in the second half of 2026, with a gradual scale-up over the following years.

Morgan Stanley estimates that the first 1 GW phase of AI infrastructure under construction could require capital expenditure of about $12-15 billion. As for the funding, the brokerage noted that RIL generates around $14-15 billion of annual operating cash flow from its existing businesses.

The brokerage expects the proposed ‘intelligence’ business to deliver superior economics compared with Reliance’s earlier large bets, projecting a post-tax return on capital employed of over 12 percent and an implied return on equity of nearly 18 percent over five years, materially higher than returns seen in telecom or retail.

On February 19, Ambani reiterated the group’s long-term intent at the India AI Impact Summit, describing the planned investment as ‘patient and disciplined’ capital aimed at building sovereign compute infrastructure and lowering the cost of intelligence. Ambani said Reliance and Jio would move from connecting India to data towards delivering AI-driven services at scale, supported by in-house green energy and nationwide edge computing.

The announcement comes ahead of the much-anticipated IPO of Jio Platforms, Reliance’s technology and telecom arm, which bankers had previously valued at around $170 billion, adding to investor focus on capital allocation and long-term value creation.

Reliance Industries shares rose 0.9 percent to Rs 1,422.2 on Friday. The stock has gained 15.3 percent over the past year, beating the Nifty’s 11.7 percent rise, taking the company’s market capitalisation to about Rs 19.1 lakh crore. Of the 37 analysts tracking the stock, 35 have a ‘buy’ recommendation.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Disclaimer: Moneycontrol is part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.