GF SEC: The regularization of AI waste recycling will be an inevitable trend, and qualified industry leaders are expected to benefit fully.

GF SEC released a research report stating that by combining the traditional 5% residual value level of electronic products, the scale of the AI electronic waste industry at the end of the 15th Five-Year Plan period will reach 500 billion yuan. Considering the high value characteristics of servers and combining the residual value of typical cases, it is expected that the AI server recycling market will generate 60-76 billion yuan per year in the two-year period from 2027 to 2028. The firm believes that the formalization of AI waste recycling will be an inevitable trend, and industry leaders with qualifications for dismantling electrical and electronic equipment are expected to benefit fully. GF SEC's main points are as follows: The booming development of the trillion-dollar AI industry, with the value of 500 billion yuan in AI waste waiting to be tapped Generative AI is sweeping the world. In the Fourth Session of the 14th National People's Congress in March, the Director of the National Development and Reform Commission, Zheng Zhajie, introduced that by the end of the 15th Five-Year Plan period, the scale of the artificial intelligence-related industry will grow to more than trillion. The vigorous development of the AI era, coupled with increasingly complex electronic products (for example, in two years, the number of mainstream GPU components has increased from 35,000 to 600,000, and the weight has increased from 70 pounds to 3000 pounds), has led to an exponential growth in AI electronic waste - a warning from a Nature paper: if circular economy strategies are not adopted, the electronic waste generated by generative AI between 2020 and 2030 will increase nearly 1,000 times. Combining the 5% residual value level of traditional electronic products, the scale of the AI electronic waste industry at the end of the 15th Five-Year Plan period will reach 500 billion yuan. Policy turning points accelerate formalized recycling, ushering in the first wave of AI server recycling in 2027-2028 On March 1, 2026, the new version of the "Pollution Control Technical Specifications for the Disposal of Waste Electrical and Electronic Products" was issued, for the first time, including artificial intelligence servers, intelligent consumer devices (including intelligent Siasun Robot&Automation, etc.) into the scope of mandatory national control, and requirements for collection, treatment, supervision, and other processes have been raised. The era of formalized AI waste recycling has arrived. The development of AI computing power infrastructure takes the lead, and the AI server recycling market is expected to lead the way. According to data from the China Information and Communication Research Institute, in 2024, China's AI server shipments reached 630,000 units, a year-on-year increase of 93%, with a cumulative volume of over 1.7 million units in six years, reaching a market size of 22.1 billion U.S. dollars. Calculating based on a lifespan of 3-5 years, the AI servers purchased in 2024 will enter a replacement cycle in 2027-2028. Considering the high value characteristics of servers and combining the residual value of typical cases, it is expected that in the two-year period from 2027 to 2028, the recycling market for AI servers alone will generate 60-76 billion yuan per year, and this is just the beginning. High value and high thresholds coexist, industry leaders in electrical and electronic dismantling are expected to benefit first AI server recycling is different from traditional electronic waste, with the following characteristics: (1) High residual value, for example, in 2025, the residual value of H100 can reach as high as 80-90%, with a recycling price of 28,000-35,000 USD per card; (2) High concentration, according to TrendForce, in 2022, in the AI server procurement volume, 8 domestic and foreign giants including Microsoft, Google, Alibaba, and Tencent accounted for 77%, and future AI waste will also come from them; (3) High difficulty, high-value AI servers can be reused in different ways based on their condition, such as semi-new utilization, complete machine refurbishment, parts sales, material extraction, etc., requiring high comprehensive capabilities from recyclers; (4) High requirements, liquid cooling system coolants are strictly prohibited from being directly discharged, data security destruction requirements form a rigid access threshold, combined with the increasing emphasis on environmental protection requirements (some waste belongs to hazardous waste) and the carbon tracing and ESG requirements of leading AI companies, the formalization of AI waste recycling will be an inevitable trend, and industry leaders with qualifications for dismantling electrical and electronic equipment are expected to benefit fully. For example, Hangzhou Dadi Haiyang Environmental Protection, the dismantling industry leader in Zhejiang Province, has recently set up a subsidiary to start its server recycling business layout. AI waste recycling is an overlooked hidden track in the AI era by the firm, and it suggests paying attention to Hangzhou Dadi Haiyang Environmental Protection, Hwaxin Environmental, China Resources and Environment, etc. Risk factors Rapid depreciation and iteration risks of AI servers, fluctuations in second-hand demand and price uncertainty risks, changes in industry structure and risks of new entrants.