Zheshang: Overseas large factories significantly increase Capex, liquid cooling market expected to accelerate volume growth.

Zheshang released a research report stating that the overseas major factories have significantly increased their Capex in Q2 2025, and the AI industry's "investment-growth-reinvestment" positive cycle logic continues to strengthen. The drive towards whole cabinet product forms is accelerating the penetration rate of liquid cooling. There is a clear demand for liquid cooling for Nvidia GPUs and self-developed ASIC chips by major cloud providers, and the overseas liquid cooling market is expected to accelerate its growth. The demand for liquid cooling driven by Nvidia GPUs and cloud providers' self-developed ASIC chips is expected to drive rapid growth in the liquid cooling market. The estimated market size of the liquid cooling market from 2025 to 2027 is approximately 35.4/71.6/108.2 billion yuan, with the market space expected to exceed one trillion yuan in 2027. In terms of targets, it is recommended to focus on Shenzhen Envicool Technology (002837.SZ), Guangdong Shenling Environmental Systems (301018.SZ), and Shenzhen Cotran New Material (300731.SZ). Key points from Zheshang are as follows: Significant increase in overseas major factories' Capex, continued high prosperity in AI The positive cycle logic of "investment-growth-reinvestment" in the AI industry continues to strengthen. Financial reports from overseas CSP manufacturers show accelerated growth in AI cloud business and Capex investment exceeding expectations, with Capex expectations for 2025 and 2026 being revised upwards. In Q2 2025, the capital expenditure of Microsoft, Google, Meta, and Amazon totaled 96.1 billion US dollars, a year-on-year increase of 66%. Vertiv's performance and orders in Q2 2025 continued to be strong, with guidance raised again for the full year. In Q2 2025, Vertiv's revenue was 2.638 billion US dollars, a year-on-year increase of 35%, exceeding market expectations by 12%, driven by strong demand in data centers and increased market share; adjusted EPS was 0.95 US dollars, 14% higher than expected. Organic orders in Q2 2025 increased by 15% year-on-year and 11% quarter-on-quarter, with organic orders over the past 12 months (TTM) increasing by 11%, backlog orders reaching 8.5 billion US dollars, and the order-to-ship ratio at about 1.2x, reflecting continued strong market demand. The revenue growth guidance for 2025 is centered at +24%, up from +18% previously; the adjusted operating profit margin guidance for 2025 is centered at 20%, with the long-term goal of reaching a 25% adjusted operating profit margin by 2029. Accelerated penetration rate of liquid cooling due to increased power consumption of GPU/ASIC chips The drive towards whole cabinet product forms is accelerating the penetration rate of liquid cooling, with Nvidia GB200/GB300 NVL72 as liquid-cooled cabinets; Meta's MTIA T-V1 chip will use liquid cooling for heat dissipation, and T-V2 will introduce a 170kW high-power rack; Microsoft stated at the Q2 2025 performance meeting that all of the company's data centers now support liquid cooling; Google introduced liquid cooling for the third generation TPU in 2018. There is clear demand for liquid cooling for Nvidia GPUs and self-developed ASIC chips by major cloud providers, and the overseas liquid cooling market is expected to accelerate its growth. It is estimated that Nvidia GPUs and cloud providers' self-developed ASIC chips will collectively drive the liquid cooling market to double in growth next year, with the market space expected to exceed one trillion yuan in 2027 (core assumptions and calculation process as follows) Nvidia B-Series chips: Based on estimates, the shipments of AI server racks with B200 GPUs for the full year of 2025 are expected to reach 25,000-30,000 units, with the median shipment being 28,000 racks, each equipped with 72 B200 chips, corresponding to approximately 2 million chips. It is assumed that the shipments of AI server racks in 2026 (including GB200 NVL72 and GB300 NVL72) will reach 70,000 units, corresponding to approximately 5 million B200/B300 chips. Since Nvidia has not yet disclosed the specific parameters of the next generation Rubin series products, the shipments of B200/B300 chips are still used to predict the market situation in 2027. Based on Nvidia's data center business revenue of 115.2 billion US dollars in 2024, AMD's forecast that the AI chip market will reach 500 billion US dollars in 2028, and the previous prediction that Nvidia's market share in 2028 will be approximately 73%, the compound annual growth rate of Nvidia's data center revenue from 2024 to 2028 is approximately 33%. Assuming that Nvidia's data center revenue will grow by 33% in 2027, it is estimated that the shipments of Nvidia AI chips in 2027 will be approximately 7 million chips, corresponding to 100,000 racks (calculated based on 72 chips per rack). Based on estimates, the liquid cooling value per rack is approximately 78,820 US dollars, equivalent to approximately 1,095 US dollars per B200/B300 chip. Based on the assumptions above, it is estimated that the liquid cooling demand driven by the Nvidia B-Series chips is expected to be approximately 2.2/5.5/7.7 billion US dollars in 2025-2027, or approximately 15.9/39.5/55.3 billion yuan. ASIC chips: As previously mentioned, cloud providers are actively promoting liquid cooling solutions, assuming that ASIC chips will use a similar architecture to the NVL72 rack and adopt liquid cooling for heat dissipation. It is expected that Google's TPU shipments in 2025 will reach 1.5-2 million units, and Amazon's AWS Trainium2 ASIC shipments will be approximately 1.4-1.5 million units. The combined shipments of Google and AWS in AI TPU/ASIC chips have reached 40-60% of Nvidia's GPU shipments, and with Meta beginning large-scale deployment of self-developed ASIC solutions in 2026 and Microsoft starting from 2027, it is expected that the total shipments of ASIC chips will surpass Nvidia GPUs at some point in 2026. It was previously estimated that the ASIC market size in 2024 would be approximately 122 billion US dollars, and combined with forecasts from Broadcom and Marvel, the ASIC chip market size in 2027 is expected to be between 600-900 billion US dollars, with a compound annual growth rate of 65% from 2024 to 2027. Assuming that the shipments of ASIC chips in 2025 will be approximately 3 million units, with a year-on-year growth rate of 65% in both 2026 and 2027, the estimated shipments of ASIC chips in 2026 and 2027 are approximately 49.5/81.7 million units. The thermal design power consumption of Google and Microsoft's ASIC chips is lower than that of B200 chips, with the latest Google TPU v7p consuming 959W and Microsoft's latest ASIC chip having a per-card power consumption of 700W. Assuming the average power consumption of ASIC chips is 850W, which is approximately 85% of the 1000W per-card power consumption of B200 chips, the corresponding liquid cooling value per ASIC chip is estimated to be approximately 900 US dollars. Based on the assumptions above, it is estimated that the demand for liquid cooling driven by ASIC chips will be approximately 2.7/4.5/7.4 billion US dollars in 2025-2027, or approximately 19.5/32.1/53 billion yuan. In conclusion, Nvidia GPUs and cloud providers' self-developed ASIC chips are jointly driving rapid growth in the liquid cooling market, with the estimated market size of the liquid cooling market from 2025 to 2027 being approximately 35.4/71.6/108.2 billion yuan, and the market space expected to exceed one trillion yuan in 2027. Risks: Data calculation deviations; industry development falling short of expectations; intensified market competition exceeding expectations; macroeconomic environment and policy changes, and other risks.