Guotai Junan: High demand for AI servers driving performance growth of domestic liquid cooling, power supply, connector, and copper cable manufacturers.

Guotai Junan released a research report stating that domestic Internet companies and operators are increasing their investment in servers, with AI servers moving towards high integration. Power consumption will increase significantly, driving the shift in server cooling solutions towards liquid cooling. Power density of power supplies will continue to increase, while the requirement for signal transmission between GPUs will drive the continuous upgrading of high-speed backplanes, high-speed I/O connectors, and high-speed copper cable transmission rates, benefiting the related supply chain deeply. Key points from Guotai Junan are as follows: High demand for AI servers, with liquid cooling, power supplies, and interconnects seeing price increases. According to IDC, the Chinese AI server market size is expected to grow from $19 billion in 2024 to $55 billion in 2028. Domestic cloud companies and operators are actively promoting data center construction, with ByteDance's capital expenditure expected to exceed 100 billion yuan by 2025. To support more efficient and faster model training and inference demands, as well as reduce data transfer latency between cabinets, the computational power of AI servers within a single cabinet continues to increase, leading to increased power consumption per cabinet. The power consumption of Nvidia Rubin architecture server cabinets may reach 1MW. With the increase in power consumption and data transmission rates of AI servers, the cooling, power supply, and interconnect performance requirements will significantly increase, driving the corresponding components to see price increases. Liquid cooling is cost-effective, with short-term cooling plates becoming mainstream, and domestic breakthroughs expected in AI server power supplies. While the initial investment cost of liquid cooling solutions is higher than air cooling, it does not require fans, effectively reducing server power consumption, making it more cost-effective in the long run. Short-term liquid cooling with cooling plates will dominate the market due to its strong single point heat dissipation capability, low initial investment cost, and low operational difficulty. The increase in power consumption of AI servers drives the growth in AC/DC power supply density, with single power supply densities expected to exceed 10kw in the future. By 2025, the Chinese AI server power supply market size is expected to reach 8.334-15.68 billion yuan, with ample room for domestic substitutes. Domestic manufacturers such as Shenzhen Megmeet Electrical and Shenzhen Honor Electronic are actively pushing for the mass production of 5.5kw AI server power supplies, expecting a breakthrough in domestic production. Interconnect speeds are increasing, offering development opportunities for connectors and copper cables. With more GPUs integrated into server cabinets, the signal transmission between GPUs becomes increasingly important. High-speed backplane connectors and high-speed I/O connector transfer rates will be iteratively upgraded to 448G/224G. By 2025, the market size for high-speed backplane connectors corresponding to only NVL72 and NVL36 could reach 7.69 billion yuan. Currently, the gap between domestic connector manufacturers and international leaders is gradually narrowing, with domestic 224G connectors expected to be produced in volume by 2025. Copper cable interconnect is currently the most cost-effective transmission method inside server cabinets. According to LightCounting, with the mass production of GB200, the global high-speed copper cable market is expected to grow by approximately 90% to $1.5 billion by 2025, with the market size estimated to be close to $3 billion by 2028. The upgrade of signal transmission rates is driving copper cables to shift from DAC to AEC. Leading domestic copper cable manufacturers have already entered the supply chain of international and domestic major customers, and are expected to benefit fully in the future. Investment recommendations: Recommended targets: Sichuan Huafeng Technology (688629.SH), Luxshare Precision Industry (002475.SZ), Suzhou Recodeal Interconnect System (688800.SH). Beneficiary targets: 1. Liquid cooling: Shenzhen Envicool Technology (002837.SZ), Guangzhou Goaland Energy Conservation Tech (300499.SZ), Guangdong Shenling Environmental Systems (301018.SZ), SUGON DATA ENERGY (872808.BJ), 2. Server power supplies: Shenzhen Megmeet Electrical (002851.SZ), Shenzhen Honor Electronic (300870.SZ), China Greatwall Technology Group (000066.SZ), Bichamp Cutting Technology (002843.SZ), 3. Connectors: Jonhon Optronic Technology (002179.SZ), Dongguan Dingtong Precision Metal Co., Ltd. (688668.SH), Wenzhou Yihua Connector (002897.SZ), YD Electronic Technology (301123.SZ), 4. High-speed copper cables: Shenzhen Woer Heat-shrinkable Material (002130.SZ), Shenyu Communication Technology Inc. (300563.SZ), Kingsignal Technology (300252.SZ). Risk warning: AI server demand falls short of expectations; server component technology advances are not as expected.