CITIC SEC: Expanding liquid cooling market space, optimistic about the potential of domestic companies going global.

CITIC SEC's research report states that the hot design power density of AI servers with custom ASIC chips from Google, Meta, Microsoft, AWS, and NVIDIA GPU is increasing, clarifying the demand for liquid cooling. With the continuous increase in shipments of ASIC chips and NVIDIA GB300, the penetration rate of liquid cooling will significantly increase, expanding the market space. Domestic liquid cooling companies have excellent comprehensive capabilities in technology, product quality, cost, and service, and the potential for these companies to expand overseas is promising. CITIC SEC's main points are as follows: Cloud service providers use liquid cooling solutions for ASIC chips, opening up market space. Meta is collaborating with Broadcom to create custom ASIC chips, pushing the thermal design power of custom AI servers to above 180kW, using liquid cooling heat dissipation components. Google has been using liquid cooling solutions from TPU3.0 onwards. Global cloud service providers are also advancing their layout of self-developed ASIC chips, and we believe that the penetration rate of liquid cooling for ASIC chips is expected to increase significantly. We expect the shipments of ASIC and NVIDIA GPU chips to significantly increase in 2026, which will greatly expand the market space for liquid cooling. Google's TPU, as a representative product in the ASIC field, has gone from the first generation TPU in 2015 to the current seventh generation TPU; AWS is focusing on the Trainium chip, driving its deep application in public cloud and e-commerce scenarios; Meta's MTIA chip has iterated to the second generation, mainly used for model inference, and plans to launch a training-specific ASIC in 2026. In addition, OpenAI plans to produce ASIC using TSMC's 3nm and A16 process technology, expected to achieve mass production by the end of 2026, further intensifying industry competition. We estimate that the liquid cooling system's liquid cooling value per KW is about 8000 yuan, with the CDU value accounting for about 40%, liquid cooling board accounting for about 20%-30%, and UQD accounting for about 10%. Assuming that the shipments of ASIC+GPU chips exceed 10 million pieces in 2026, the corresponding total market space for liquid cooling is about 80 billion yuan. Mainland Chinese liquid cooling companies have strong competitiveness and huge opportunities for going global. Currently, companies in the North American liquid cooling industry chain are mainly concentrated in the United States and Taiwan, China, while mainland Chinese liquid cooling companies have made significant improvements in technology, product quality, customer expansion, project experience, and some leading companies have entered the NVIDIA supply chain system. We expect more companies to successfully go global in the future and achieve a certain market share worldwide. If mainland Chinese companies can obtain a 30% share of the 80 billion market space, corresponding to a revenue volume of 24 billion yuan, this would provide significant business performance elasticity for these companies. Risk factors: AI applications not meeting expectations; capital expenditures of cloud service providers and operators not meeting expectations; liquid cooling penetration rate not meeting expectations; geopolitical risks; intensified industry competition; mainland Chinese liquid cooling companies not making expected progress in going global. Investment strategy: Customized ASIC chips for cloud service providers are expected to grow rapidly, and the strong demand for liquid cooling will greatly expand the market space. Mainland Chinese liquid cooling companies have made significant improvements in technology, product quality, customer expansion, and project experience, and some leading companies have entered the NVIDIA supply chain system. We expect more companies to successfully go global in the future and achieve a certain market share worldwide.