AI arms race spills over into cooling segment! Alphabet Inc. Class C (GOOGL.US) is reported to be heading to China to "sweep" liquid cooling equipment, and China's supply chain welcomes the opportunity.

According to informed sources, Alphabet Inc. (GOOGL.US) subsidiary Alphabet Inc. Class C is in talks with China's Shenzhen Envicool Technology and other Chinese companies with the intention of purchasing liquid cooling equipment for data centers. With the intensification of the artificial intelligence arms race, not only has the supply of advanced chips tightened, but even relatively low-value supporting equipment is facing supply pressure. Due to the heat generated by high-density computing far exceeding the processing capacity of traditional air cooling systems, liquid cooling technology has become a key infrastructure for AI data centers. This technology achieves cooling effects by circulating water or other liquids on or around the surface of the equipment. Sources stated that Alphabet Inc. Class C sent a purchasing team from its operations team in Taiwan to visit the mainland this month, reflecting the shortage of components for such systems. Two of the three sources who preferred not to be named indicated that the Alphabet Inc. Class C team met with Shenzhen Envicool Technology during the visit. Another source mentioned that the team also plans to meet with at least one other company. This negotiation highlights an industry trend: with the global competition to build AI data center infrastructure, not only is the supply of high-end chips becoming increasingly tight, but even lower-value supporting equipment is in short supply. Meanwhile, Chinese suppliers are playing an increasingly important role in the global wave of data center construction. As the market explodes, Chinese suppliers are rising According to a report by JPMorgan Chase, driven by demand from NVIDIA Corporation and cloud service providers deploying custom AI chips, the global AI server liquid cooling system market is expected to soar from $8.9 billion last year to over $17 billion in 2026. Established in 2005, Shenzhen Envicool Technology is currently valued at 98 billion RMB (approximately $14 billion) and has seen a 40% year-on-year increase in revenue in the first three quarters of this year. In a recent industry exhibition, the company showcased a cooling liquid distribution unit tailored to the specifications required by Alphabet Inc. Class C. This unit is the core component of the liquid cooling system, responsible for distributing cooling liquid to various server racks. A report released by Goldman Sachs Group, Inc. after an analyst meeting with the company this month stated that Shenzhen Envicool Technology expects its liquid cooling business revenue to achieve quarterly growth this year, with potential orders including Alphabet Inc. Class C's intention to purchase their fifth-generation cooling liquid distribution unit and other components. The company also announced plans to expand its production capacity at a new factory in Guangdong Province, while continuing to advance its production base construction in Thailand and the United States. The liquid cooling market is highly fragmented, with numerous suppliers providing different components within the system. Driven by robust domestic demand, Chinese suppliers have gradually gained advantage. Numerous domestic data center projects have helped them increase output and lower costs. Key suppliers in the industry also include component manufacturers such as Lingyi Itech (002600.SZ), Feilong Auto Components (002536.SZ), as well as server manufacturers like Lenovo (00992.HK). In the Chinese Taiwan region, companies such as Foxconn (2317.TW), Sun Hong Technology (3324.TWO), and Delta Asia (6762.TWO) are major suppliers of such components for Alphabet Inc. Class C in Asia. Other Chinese component suppliers benefiting from the growth of AI data centers include optical module manufacturers such as Zhongji Innolight (300308.SZ) and Eoptolink Technology Inc., (300502.SZ). Additionally, Chinese manufacturers dominate the printed circuit board market, with companies like Victory Giant Technology (300476.SZ) developing NVIDIA Corporation and Alphabet Inc. Class C as clients.