marcellus.in

From Our CIO’s Desk

What Goes into the Making of a Data Center?

Two global headlines have dominated the financial landscape in recent times:

Alphabet is executing a record-breaking $85 billion equity raise to fund its AI infrastructure and global compute footprint.
SpaceX is setting the stage for the largest IPO ever recorded, targeting a $1.8 trillion valuation.

Saurabh Mukherjea

Founder & CIO

While SpaceX’s valuation commands immediate attention, it is actually the Big Tech spending on AI infrastructure by Alphabet, Amazon, Meta, Apple, and Microsoft that we are focusing on. In 2026 alone, these companies are investing $800 billion into AI infrastructure—a staggering 84% jump from 2024. No industry in human history has ever deployed this much capital, this rapidly.

But what exactly goes into an AI data center, why does it cost so much, and what does it mean for an investor sitting in India?

Building a 1-gigawatt (GW) AI data center is one of the most capital-intensive infrastructure projects on earth, costing anywhere between $35 billion to $50 billion. In a standard $50 billion facility, a massive $30 to $35 billion is spent strictly on high-end GPUs and specialized server architectures.

Legacy data centers utilized 5–15 kW racks cooled by standard air conditioning. However, modern AI racks draw over 100 kW of power, forcing developers to install expensive, import-dependent liquid cooling solutions and scour the globe for power—even going so far as restarting defunct nuclear plants. Additionally, because traditional facilities physically cannot support the immense structural loads and heat generation of next-gen AI hardware, physical construction costs have rocketed 6x higher over the past five years.

And this brings to the current data centre boom in India.

While India’s domestic data center footprint is growing fast, this global AI infrastructure arms race presents three distinct macroeconomic friction points for our economy:

• Current Account Deficit Pressures: Virtually every critical component powering these facilities—from cutting-edge GPUs and advanced liquid cooling loops to the high-grade CRGO electrical steel inside transformers—is imported. This massive tech-import bill will inevitably exert unprecedented pressure on the Indian Rupee.

• Technological Sovereignty: Relying entirely on foreign-owned hardware architecture and software ecosystems to run India’s critical networks—from banking systems to public markets—poses long-term sovereignty questions.

• The White-Collar Employment Squeeze: As global corporations pour historic sums into AI infrastructure, they are actively looking to defend their operating margins by trimming costs elsewhere. Routine IT delivery, back-office maintenance, and entry-level coding—the traditional bedrock of India’s graduate workforce—are the primary targets for AI automation.

This pressure on white-collar employment brings us directly to a critical question on wealth creation. While our local earning avenues face technological disruption, our daily lifestyles are becoming completely dependent on that very same global technology.

The software, hardware, and premium services we consume today are increasingly priced in global, foreign-currency terms and the wealth being generated by this AI revolution is heavily concentrated overseas—namely in the US, Taiwan, and Europe.

Keeping 100% of your assets only in India creates a mismatch. Safeguarding your purchasing power in the AI age requires diversifying a portion of your capital into the global economies driving this change. While India remains a fantastic long-term, consumption-led domestic growth story, global diversification is no longer a luxury—it is turning to become a necessity.

To explore the AI infrastructure boom in detail and how you can invest globally with ease, read my full blog by clicking here.

Tej Shah
Portfolio Manager

Multi Asset Portfolio

Rules based portfolio with a basket of different asset classes built on your financial goals providing risk-adjusted returns.

Portfolio Outlook

The strategy’s diversified positioning across five major asset classes chiefly, global equities, Cash, REITs, INVITs, Gold along with Indian equities, is expected to help investors navigate through period of heightened uncertainty going ahead.

We exited from office REITs across multi-asset portfolios last month given expectations of higher interest rates. We continue to look for opportunities to rebalance the portfolio through ongoing market volatility.

Allocation to Indian Small midcaps, Gold and Global allocation helped the strategy outperform in May, whereas allocation to Large-Cap and Value equities were relative drags during the month.

Performance of the scheme (Figures in %)

Vansh Gandhi
Portfolio Manager

MeritorQ Portfolio

Rules based Multicap strategy investing in relatively undervalued quality companies.

Portfolio Outlook

Portfolio remains positioned to weather uncertainty and benefit from possible earnings upgrades, with defensive allocation to large caps balanced by meaningful allocation in good quality small and midcap companies.

Relative to the benchmark, the strategy’s higher allocation to small and midcap stocks and underweight in PSU and oil and gas stocks contributed to relative outperformance in May. Allocations to REITs was a slight drag to portfolio performance.

Performance of the scheme (Figures in %)

Arindam Mandal
Head of Global Equities
Marcellus LLC

Global Compounders Portfolio

A gateway to investing in some of the best global companies from the Developed World.

Portfolio Outlook

The portfolio was up >2% during the month of May-26, broadly in line with the average stock in the S&P 500, while the headline index was up around 5%. The gap was again driven by the sharp rally in AI-linked and speculative parts of the market.

This pattern has been in place since the post-trade-war rebound around May 2025, barring a brief pause between November 2025 and March 2026. In May 2026 alone, SOXX (Semiconductor ETF) was up ~23%, Unprofitable technology stocks index were up ~27%. Since the end of May 2025, SOXX is up 170%+, while unprofitable technology stocks are up 150%+. Our AI exposure is low – roughly half that of the market as we remain sceptical on the cycle duration and valuation – has weighed on relative performance.

The current divergence is extreme. E.g. since end-May 2025, Berkshire Hathaway is down around 5%, while the S&P 500 is up 29%+. Similar divergences have occurred just before the dotcom bust when Berkshire lagged the index by ~40-50%. Whether this is a new paradigm or another speculative phase remains the key question. Our view is that, over time, leadership should return to profitable, predictable growth.

Fundamentally, the portfolio remains strong. Over the last three years, portfolio companies have compounded EPS at around 16%, and Q1 2026 EPS growth was 20%+, both ahead of the broader index, and trading at a cheaper valuation compared to the market.

Anything related to AI (TSMC, Infineon) worked well. With oil price normalizing, some of the Aerospace stocks made a comeback. On the other hand anything that pertains to quality value lagged (e.g. Parker Hannifin).

Performance of the scheme (Figures in %)

Rakshit Ranjan
Founder & Portfolio Manager

Consistent Compounders Portfolio

Concentrated portfolio of heavily moated companies that can drive healthy earnings growth.

Portfolio Outlook

In an uncertain macroeconomic environment shaped by AI disruption and shifting global geopolitics, CCP has evolved significantly.

While maintaining a concentrated portfolio focused on quality businesses, we have diversified our top holdings across uncorrelated sectors such as healthcare, auto components, and export-led manufacturing.

This deliberate shift away from our historical reliance on large-cap consumption, financials and IT services helps mitigate AI related risks to jobs and the domestic growth slowdown. Furthermore, allocations have been increased towards companies with higher earning growth, valuation re-rating potential and recent upgrades to consensus expectations. CCP remains a concentrated strategy with over 40% of the portfolio allocated to the top-5 positions. Total number of stocks currently in the portfolio is 19. Stock selection is still done basis the quality of the underlying businesses. Expected earnings growth over the next 3-5 years across all portfolio constituents is mid-teens or higher. In terms of forward valuation multiples, across more than half of the allocations, expected valuation changes are expected to contribute positively towards portfolio performance. During FY26, the portfolio constituents delivered acceleration in weighted average EPS growth from 10% YoY in Q1FY26 to 14% YoY in 2QFY26, 17% YoY in 3QFY26 and 22% YoY in 4QFY26.

Over the last 12 months, while Eicher, Astral, and Divis have been the biggest contributors to portfolio performance, CMS, Info Edge and Trent have been the biggest detractors.

Performance of the scheme (Figures in %)

Tej Shah
Portfolio Manager

Keshav Binani
Co-Portfolio Manager

Kings of Capital

Our financial sector focused investment strategy with a portfolio of banks, NBFCs, life and general insurers, asset managers and brokers.

Portfolio Outlook

May was a resilient month for KCP, with portfolio NAV rising 0.3%, compared to declines of 1.7% and 1.1% for the Nifty 50 and Nifty Bank, respectively.

The month also marked the conclusion of the Q4’26 earnings season. Portfolio companies delivered median earnings growth of 18% YoY, accelerating from 11% in Q2’26 and 15% in Q3’26. Earnings growth in the microfinance sector rebounded sharply, while vehicle and gold financiers continued to report strong performance.

Asset quality trends remained positive across the portfolio, supported by improving credit metrics and credit bureau data that points to better risk indicators across lending products in Q4’26.

Demand conditions remain healthy, although lenders continue to exercise caution amid the ongoing West Asia conflict and rising inflation. Despite the recent rally, valuations across several holdings remain attractive. Incremental allocations have focused on businesses where share price corrections have been sharp but confidence in FY27 earnings growth remains high. KCP currently trades at approximately 19x 1-yr forward consensus earnings, near the lower end of its historical valuation range. Key risks include a prolonged geopolitical conflict and elevated crude oil prices, which could increase inflationary pressures and weigh on economic activity.

Over the last 12 months, top detractors in KCP were CMS Info Systems and HDFC Bank. The top contributors to the portfolio over the last 12 months have been City Union Bank and CreditAccess Grameen.

Performance of the scheme (Figures in %)

Ashvin Shetty
Portfolio Manager

Little Champs & Rising Giants

SMID-cap strategies that invests in companies with good corporate governance, capital allocation and competitive advantages.

Portfolio Outlook

Both LCP and RGP portfolios witnessed allocation weighted net earnings growth of 14% YoY for 4QFY26. We remain cautious for two key reasons.

(i) Geopolitical uncertainty persists, with crude oil prices staying at elevated levels; and

(ii) A significant portion of the impact from raw material price inflation, supply chain disruptions, and related headwinds could only materialise in the 1QFY27 earnings season.

One way we are dealing with this is maintaining a meaningful cash allocation in the portfolio — which would help us cushion against potential drawdowns and deploy capital opportunistically in stocks that see significant price corrections.

Based on the three-month attribution analysis ending May 31, 2026, the primary detractors were Escorts, Safari (both impacted by the Middle East conflict) and Brookfield (concerns around the possibility of interest rate hikes). On the other hand, the top contributors to portfolio performance were Acutaas Chemicals, Stylam Industries and Inventurus Knowledge Solutions – all of which reported solid performance in 4QFY26 results.

Performance of the scheme (Figures in %)

Join our Community!

Marcellus Investment Managers Private Limited (“Marcellus”) is regulated by SEBI to act as a Portfolio Manager and Investment Manager to AIF. Marcellus is regulated by the IFSCA as a Fund Management Entity – Retail to render investment management services. Marcellus is also registered with the US Securities and Exchange Commission (“US SEC”) as an Investment Advisor. Marcellus International Investment Managers LLC (“Marcellus LLC”) is a wholly owned subsidiary of Marcellus, based in the USA. No content of this publication, including performance-related information, is verified by SEBI, IFSCA, or the US SEC.
If the recipient is based outside India or the US, Marcellus may not be regulated in such jurisdiction, and this material is not a solicitation to use Marcellus’ services.
This communication is confidential, privileged, and intended solely for the addressee. If you are not the intended recipient, any use or access is prohibited; please notify the sender immediately. This material contains proprietary information and requires prior written consent from Marcellus before reproduction in any form. This material is not intended for US clients.
Data, examples, and forward‑looking statements are based on publicly available sources and may include assumptions. Past performance is not indicative of future results. Actual results may differ materially due to market risks, economic conditions, uncertainties and inflation; there is no assurance that investment objectives will be achieved.
Recipients are solely responsible for their actions and are urged to read the Disclosure Document, Form ADV, and Form CRS, and consult their own legal/tax advisors before investing. Marcellus, its directors, and employees shall not be liable for any loss or damage (direct, indirect, punitive, or consequential) arising from the use of this material.
Stocks described herein are for illustration purposes only and are not recommendations. As these stocks may form part of the portfolios, Marcellus, its clients, employees, and their immediate relatives may have interests or stakes in them.

Regards, Team Marcellus

If you want to read our other published material, please visit https://marcellus.in/pms-investment-blog/

Marcellus Portfolio Updates & Insights – June 2026

From Our CIO’s Desk

Multi Asset Portfolio

MeritorQ Portfolio

Global Compounders Portfolio

Consistent Compounders Portfolio

Kings of Capital

Little Champs & Rising Giants

Marcellus Portfolio Updates & Insights - April 2026