Tianfeng: AIDC is focusing on the centralized construction of diesel engine units, the demand space is increasing, and attention is given to domestic core manufacturers for 0-1 opportunities.

Tianfeng issued a research report stating that the global AI computing power infrastructure investment exceeds trillions of dollars, and the construction of high-power data centers is driving the rapid growth in demand for diesel generators (diesel engines). Domestic original equipment brands are accelerating the replacement of imported products through technological breakthroughs, and the industry is experiencing opportunities for simultaneous increase in quantity and price. In situations of tight production capacity, it is recommended to focus on: 1) achieving breakthroughs in producing domestically-made/big bore diesel engines with brand advantages for backup power in data centers; 2) domestically-made OEM factories with pricing power; 3) components with pricing power, profit release space, and tied to top-tier generator sets. Key viewpoints from Tianfeng: AI infrastructure wave accelerates, diesel engines expected to benefit Global AI capital expenditure is rapidly increasing, with continuous growth in investment in AI computing power infrastructure. The US government is pushing the "Stargate" project, planning to invest $500 billion in AIinfra; according to Huaxin Consulting & Design Institute, China will invest at least 500 billion yuan in the next three years to build AIDC; Microsoft, Amazon, Google, Meta are expected to invest over $300 billion in the AI field over the next 25 years. The AI center heavily uses high-power chips such as GPUs, with chip and cabinet power continuously increasing, driving rapid expansion of data center scale. The importance of data center infrastructure continues to rise, requiring high power reliability, with high-grade IDCs requiring fault-tolerant or redundant configurations, usually using dual utility power feeds + UPS + diesel generators. According to the bank's analysis, the redundancy configuration rate of diesel generators in domestic high-grade data centers (calculated by power) is between 120% to 150%, and large-scale smart computing centers have even higher redundancy configurations (close to 150%). Diesel engine units: The high-end market is dominated by domestic OEMs and foreign diesel engines, with domestic originals achieving breakthroughs Diesel engines are mature in technology and widely used, with IDC being a high-value scenario. According to Frost & Sullivan and Huajing Industry Research Institute, the global diesel engine market increased from 114 to 165 billion US dollars between 2015-2023, and the Chinese market increased from 23 to 47 billion US dollars. According to Kohler's statistics, from 2017 to 2019, the top three customers in the Chinese diesel engine market were data centers/manufacturing/electricity markets, accounting for 40%, 16%, and 14% respectively, with data center customers being high-end customers with prices exceeding 2 million yuan. International giants dominate the diesel engine market, with domestic originals achieving breakthroughs. T1 international leaders include Cummins, MTU, and Caterpillar, serving mainly high-end markets; T2 includes domestic originals Weichai, Yuchai, and domestic OEMs Taihao, Kotech, Sumec Corporation, currently having limited influence in IDC and financial industries. Starting in 2024, domestic original diesel engine brands began entering the large IDC market, with Weichai winning the bid for the first time in the 2025 mobile diesel generator volume procurement. Diesel engine components: Engines/generators/control modules account for 65%/15%/2%, with strong barriers in large bore diesel engines Diesel engines: Chinese diesel engine sales from 2019 to 2024 have a CAGR of -1.65%, but diesel engine sales for power generation increased from 188,000 to 409,000 units, with a CAGR of 21.4%. Large bore diesel engines are mainly used for power generation and ships, and have long been monopolized by foreign brands; Weichai acquired large bore technology through acquisition, with sales of large bore products increasing from 2,800 to 8,800 units and revenue increasing from 780 million to 2.95 billion from 2019 to 2022, with an additional capacity of 2,500 units in 2024. Controllers: Providing engine start/stop/monitoring/protection functions, major brands domestically and internationally include Deep Sea, DANKON, and Zhongzhi, with small performance gaps, and large generator manufacturers tend to produce their own controllers. Components: High standards and complex processes are required, with stringent but stable supplier introductions. The diesel engine parts industry in China has formed a complete industrial chain, with many high-value added links already localized. Diesel engine market under the drive of AIDC: Computing power concentration accelerates the demand for diesel generators, international leaders face supply shortages, and domestic imports are expected to accelerate According to the bank's calculation, the demanded diesel generators for the power consumption of intelligent computing centers in China in 2025/26/27 correspond to 6,330/8,912/12,327 units. Currently, it is the period of concentrated construction of computing power, if considering moderate advance construction for computing power in 2025-2026, the current demand for diesel generators is about 5,000 units, with a faster growth in demand for diesel generators compared to 2024. Overseas leading companies generally have full orders and delayed deliveries, and the bank believes that the capacity expansion in the short term may prioritize supplying overseas demand. Risk warning: the construction of intelligent computing center fails to meet expectations; technological advancements in backup power lead to lower-than-expected demand for diesel generators; competitors' production expansion progress exceeds expectations; the data provided in this article is for reference only.