Reliance Industries can rise 18%, says Morgan Stanley post ₹10 lakh crore AI investment announcement

Shares of Reliance Industries Ltd. were trading little changed on Friday, February 20,  as brokerage firm Morgan Stanley sees an 18% upside on the stock.

The analyst has labelled the stock a 'top pick'. It has an 'overweight' rating on it with a price target of ₹1,803 apiece.

It said Reliance Industries has pivoted every decade in its nearly 48 years of listed history.

Reliance Industries and Jio on Thursday pledged ₹10 lakh crore (approximately $110 billion) over the next seven years, starting 2026, to build an ecosystem for AI in India "This is not speculative investment, this is patient capital to build India," Mukesh Ambani said at the AI Impact Summit.

Morgan Stanley said RIL's vision to invest around $110 billion in AI, related energy supply and the digital ecosystem over seven years is the next major shift in capital allocation.

Reliance's proposed AI investment is as large as its telecom/consumer investment in 2014-21, the analyst said. Morgan Stanley sees the company taking a partnership approach.

This investment is massive — on par with what Reliance spent to build out its entire mobile network (Jio) and retail stores over the last decade. The money isn't just for software; it includes building massive data centers, making their own AI chips, and creating renewable energy (like solar and wind) to run those power-hungry systems, energy storage and also AI chips.

As Mukesh Ambani said on Thursday, Reliance will start 120MW of capacity in the second half of 2026, while work is ongoing in Jamnagar

The other big question Morgan Stanley said is — where is the money coming from? Reliance generates about $14-15 billion in cash every year from its existing businesses but given its existing investment requirements – the analyst believes it might sell off pieces of other businesses, such as its telecom fiber network, to raise an extra $4-5 billion a year.

Morgan Stanley estimates this "Intelligence" business will be much more profitable than Reliance's older investments, potentially earning double the return 12%+ return on capital employed (ROCE), compared to what they made on telecom or retail.

Ambani's pledge came ahead of the much-awaited Jio IPO, which is the group's technology and telecom venture and is valued at an estimated $170 billion, as per bankers who spoke to Bloomberg last year.

Reliance set up its AI subsidiary in September last year, led by Jio's chief AI scientist Gaurav Aggarwal, who had previously worked at Google DeepMind as well as IBM.
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In October last year, Reliance Intelligence set 2 crore aside to incorporate Reliance Enterprise Intelligence Limited (REIL), a joint venture with Facebook Overseas, which is a Meta subsidiary.

Both firms jointly committed an an initial investment of around ₹855 crore ($100 million) in REIL, where Reliance Intelligence would hold 70% stake and Facebook Overseas would hold the remaining 30%.

Of the 37 analysts who have coverage on Reliance Industries, 35 have a 'buy' recommendation while two have a 'sell' rating.

RIL shares were trading flat at ₹1,409 apiece just after market open on Friday. The stock has gained 14% in the past year.

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