China Securities Co.,Ltd.: AI computing power-driven cooling structure upgrade, liquid cooling primary side equipment welcomes value reassessment.

China Securities Co., Ltd. released a research report stating that the high-density AI computing power is driving data center cooling from air cooling to liquid cooling. The liquid cooling architecture has significantly increased the requirements for low temperature, stability, and controllability of the cooling source, making the primary side system upgrade from auxiliary support to core infrastructure. In the primary side cooling equipment, the chiller unit and compressor are particularly crucial, with the chiller unit serving as the core cooling source, providing all-weather cooling function, and the compressor as the power core of the chiller unit, directly determining the cooling capacity, energy efficiency level, and operational stability. As data center cooling systems upgrade towards medium to high-efficiency, large cooling capacity, and magnetic levitation centrifugal direction, the value and technical barriers of chiller units and compressors are increasing, benefiting manufacturers of magnetic levitation centrifugal compressors with independent technology, as well as leading companies in chillers with large cooling capacity products and mainstream supply chains. Key points from China Securities Co., Ltd. include: AI computing driving cooling demand explosion, liquid cooling becoming the preferred solution With the wave of AI computing accelerating the iteration and commercialization of large AI models, the demand for computing power for training and inference is growing exponentially, directly leading to a surge in the construction of global AI data centers. Large technology companies at home and abroad are significantly increasing their capital expenditures related to computing power, providing strong support for the construction of AI data centers. The global and domestic AI data center market continues to expand, with high-power density large-scale and ultra-large-scale computing centers becoming the focus of future construction. At the same time, as the power density of AI data centers' individual racks continues to increase, traditional air cooling technology is unable to meet the cooling requirements of high-density computing power. Combined with the continued tightening of global data center PUE control standards under the "dual carbon" target, liquid cooling technology, with its core advantages such as low energy consumption, high cooling efficiency, excellent operating conditions, and low lifecycle costs, has become the preferred solution for AI data center cooling systems. The convergence of AI computing, power density enhancement, and PUE control tightening is driving the accelerated release of liquid cooling cooling demands, laying a solid foundation for the rapid development of the liquid cooling primary side cooling industry. Increased importance of liquid cooling primary side cooling, with chillers and compressors as core components The liquid cooling system of AI data centers is divided into primary side and secondary side by CDU. The primary side, as the outdoor cooling source side, is responsible for core heat dissipation, and its cooling source solution directly determines the data center's PUE and TCO. Working in coordination with the secondary side to complete the full cooling cycle, the primary side cooling, as the core link between the internal heat exchange of the data center and the external heat dissipation, is increasingly important. The primary side cooling solutions present three major mainstream patterns, with the chiller unit serving as the backup cooling source, being an indispensable core component in various solutions, and also the primary side with the highest value and technical barriers in liquid cooling. The compressor, as the "heart" of the chiller unit, with a cost proportion of over 50% and an energy consumption proportion of about 72%, due to significant differences in demand between AI data centers and traditional data centers, the shortcomings of screw compressors and traditional centrifugal compressors in energy efficiency, cooling capacity, and stability are evident, while magnetic levitation centrifugal compressors, with advantages such as oil-free operation, high energy efficiency, wide load adjustment, and precise temperature control, can perfectly adapt to the liquid cooling requirements of AI data centers, become a standard feature for newly built high-density intelligent computing centers. Demand explosion and technological breakthrough resonance, domestic substitution restructuring industry landscape With the acceleration of global computing power infrastructure by AI computing, the continuous increase in data center computing power density, and the acceleration of cooling demand upgrades, chillers and compressors as core equipment on the primary side directly affect data center PUE and overall operating costs. The industry demand continues to be released. The high-end market for primary side equipment globally has long been dominated by American giants such as Carrier, Trane, York, and McQuay, as well as the leading magnetic levitation company, Danfoss. Foreign companies dominate the high-end supply with advantages in technology, brand, and customer resources, but there are common issues such as high prices, long delivery cycles, inadequate localization adaptation, and tight capacity, providing an opportunity for domestic companies. With policy support and demand dividends, domestic manufacturers have made breakthroughs in core technologies such as magnetic levitation bearings, high-speed motors, and control systems. Companies such as Midea, Moon Environment Technology, Gree, Nanjing CIGU Technology Corp., LTD., and Shanghai Hanbell Precise Machinery are accelerating domestic substitution in the chiller unit and magnetic levitation centrifugal compressor sectors with high cost-effectiveness, fast delivery, and localized services, continuously penetrating the mid-high-end market. In the future, with the popularization of liquid cooling and the restructuring of the industry landscape, leading domestic companies with core technologies and scalable delivery capabilities are expected to achieve a double increase in market share and profit levels. Investment recommendation AI data centers' liquid cooling primary side cooling has become the rigid core component of AI computing infrastructure building, and the industry is in a high certainty growth stage of rapid penetration rate, technological route upgrade, and domestic substitution resonance. The high-density AI computing is driving data center cooling from air cooling to liquid cooling, with the liquid cooling architecture significantly increasing the requirements for the low-temperature output, continuous stability, and precise controllability of the cooling source, upgrading the primary side system from auxiliary support to the core component of computing infrastructure. In the liquid cooling primary side system, chillers and compressors, with their core cooling and power output functions, aligning with the trend of efficient cooling source upgrade, have significantly increased in importance and value, with the chiller unit providing all-weather cooling and stable cooling functions, being an indispensable key equipment in the liquid cooling system; the compressor, as the only power-acting component and "power heart" of the chiller unit, with a value proportion of over 50%, directly determines the cooling capacity, energy efficiency level, and operational stability of the entire chiller unit, serving as the industry's technological barriers and profit core. As the penetration rate of liquid cooling continues to rise and the power per rack continues to increase, data center cooling sources are accelerating to upgrade to medium-high efficiency, large cooling capacity, magnetic levitation centrifugal direction, driving chillers and compressors from the traditional screw route to the magnetic levitation centrifugal route, synchronously raising the value, technological barriers, and industry concentration of individual machines. Recommend focusing on the high-value, high-barrier sections of the liquid cooling primary side cooling of AI data centers, and strategically positioning two main lines: Core targets of magnetic levitation centrifugal compressors: prioritize selecting compressor manufacturers that have achieved breakthroughs in magnetic levitation bearings, high-speed permanent magnet motors, control systems, completed customer validation of products, and entered mass production, benefiting from technological upgrades and domestic substitution dividends; Leading large-capacity chiller units: pay attention to chiller unit enterprises that are oriented towards AI data center scenes, have large cooling capacity models and system design capabilities, and have entered the mainstream cloud vendors and computing center supply chains, benefiting from industry scale expansion and concentration. Risk Analysis: 1. Risk of technology iteration falling short of expectations; 2. Risk of core component supply chain failures; 3. Risk of industry demand not meeting expectations; 4. Risk of intensified industry competition.