"The "Cooling Revolution" in the era of computing power"

The emerging technology boom of artificial intelligence and other technologies is surging, and the era of computing power is rapidly approaching. Servers, as the cornerstone of computing power, are developing towards diverse computing and green, low-carbon directions. Especially with the continuous advancement of the "dual carbon" policy, green and low-carbon liquid-cooled servers are highly favored and have become the "vanguard" of reducing carbon emissions in computing power. NVIDIA's upcoming B100 CPU will adopt liquid cooling technology, and this news has led to a surge in the liquid-cooled server sector in the A-share market. According to wind liquid-cooled server index, the index has increased by 49.31% in the past month (from February 6 to March 8). The concept of liquid-cooled servers has exploded, with companies controlling self-made liquid-cooled cabinets and hot/cold aisles, mainly used in data centers, such as Sunsea AIoT Technology experiencing a 12-day, 6-board close on Friday, and Jiangsu Gian Technology achieving a 20cm limit-up; Foxconn Industrial Internet, Tongyi Carbon Neutral Technology, and Accelink Technologies, all companies that continue to develop energy-saving technologies for data centers and have innovative Liquid-cooled solutions, have also achieved limit-up. Sichuan Crun, a company with liquid-cooled product reserves for artificial intelligence applications in data centers, closed with four consecutive limit-up days on Thursday. According to incomplete statistics from Financial Union, 13 listed companies, including GRG Banking Equipment, Shenzhen hongfuhan Technology, Jones Tech Plc, Lucky Harvest, Suzhou Invotech Scroll Technologies, Feilong Auto Components, Sichuan Chuanhuan Technology, Guangdong Shenling Environmental Systems, Sichuan Crun, Zhejiang Yonggui Electric Equipment, Shenzhen Invt Electric, ZTE Corporation, Shenzhen FRD Science & Technology, and Dawning Information Industry have responded regarding their liquid-cooled server related businesses this year. Among them, GRG Banking Equipment stated on the interactive platform on Friday that its subsidiary Guangdian Wuzhou has launched a series of AI training servers, based on Kunpeng and Ascend AI processors, which can be widely used in deep learning model development and AI training service scenarios. In addition, Guangdian Wuzhou's cold-plate liquid-cooled workstation uses a customized cooling system composed of cold plates, heat pipes, cooling liquid, and heat sinks, which can be used in deep learning, facial recognition, financial modeling, virtualization, and other fields. The "heat dissipation revolution" in the era of computing power: Most A-share companies focusing on liquid-cooled server concepts are expected to see favorable performance. Analysts note that there is a gap between industry and secondary market performance. It is reported that starting from the B100 model, NVIDIA will shift all its products from air cooling to liquid cooling. NVIDIA CEO Huang Renxun has previously stated that he firmly believes that immersion liquid cooling technology is the future benchmark and will drive a comprehensive innovation in the entire thermal market. According to a related report by the Taiwan Economic Daily, this is a groundbreaking technological innovation for the overall AI server market. According to IDC's estimates, the size of the Chinese liquid-cooled server market is expected to reach $8.9 billion in 2027. Sealand expects that by 2024, AI server demand will drive the demand for heat dissipation, with the penetration rate of liquid-cooled products continuing to rise and upgrades accelerating in the heat dissipation sector. Taiwan-based Qihong estimates that by 2024, with the increase in demand for AI servers driving demand for heat dissipation, the upgrade of heat dissipation products is expected to accelerate and the future prospects for water cooling are promising. Liquid-cooled heat dissipation products are expected to be shipped in small quantities in the second half of 2024 and are expected to see explosive growth in 2025. In 2024, domestic policies will intensify the construction of intelligent computing centers, with excellent server manufacturers accelerating the establishment of a domestic AI ecosystem. For example, Huawei's 2024 Data Center Energy Top 10 Trends report highlights that liquid cooling is needed for cooling intelligent chips. Server manufacturers such as New H3C, Inspur Electronic Information Industry, Dawning Information Industry, and Super Fusion have actively launched liquid cooling solutions. Inspur Electronic Information Industry and Intel jointly released the world's first all-liquid-cooled motherboard server reference design and the company's full liquid-cooled motherboard server, marking the progress of liquid-cooled server technology. In addition, while operators are accelerating their investments in AI, they are also vigorously implementing liquid cooling technology. For example, China Telecom Corporation is investing in the construction of the largest national-level operator-grade intelligent computing center in Shanghai, which will use liquid cooling solutions for all equipment, expanding the elasticity of the liquid cooling market. According to the research report by Zhongtai Su Yi and others on January 17, the upstream products of the liquid-cooled server industry chain, including Shenzhen Envicool Technology, ZTE Corporation, Inspur Electronic Information Industry, Dawning Information Industry, and Unispl.Endour Corporation (parent company of New H3C) and others.Analysts say that the high prosperity of the industry has begun to pass on to the performance of A-share listed companies, with the performance of liquid-cooled server concept stocks generally growing. According to Wind data, there are nearly 30 A-share liquid-cooled server concept stocks. As of now, a total of 19 stocks in the liquid-cooled server concept sector have announced 2023 performance forecasts or performance reports. Specifically, Feilong Auto Components, Shenzhen Cotran New Material, Jiangsu Gian Technology, Jiang Su Alcha Aluminium Group, Changzhou Tenglong Auto Parts, Zhejiang Yinlun Machinery, Suzhou Anjie Technology, Shanghai Huafon Aluminium Corporation, Aotecar New Energy Technology, and Yinbang Clad Material have achieved performance growth or turned losses into profits. Among them, Feilong Auto Components released its performance report on February 28, achieving a total operating income of 4.095 billion yuan in 2023, a year-on-year increase of 25.69%; net profit of 262 million yuan, a year-on-year increase of 211.11%. The main reasons for the performance growth are: the company has sufficient orders, with a significant increase in operating income compared to the same period; the rapid development of the new energy industry, the increase in the proportion of hybrid and pure electric vehicles, the continuous expansion of liquid-cooled servers and other civil fields, and the growth of new energy thermal management products. In addition, the net profit of Shenzhen Cotran New Material, Changzhou Tenglong Auto Parts, Zhejiang Yinlun Machinery, and Suzhou Anjie Technology in their annual reports is expected to increase by more than 50% year-on-year. It is worth noting that Sugon Shuchuang has disclosed that it has vigorously developed the cold plate liquid cooling market in the past year. The cold plate liquid cooling infrastructure products achieved an income of 190 million yuan for the whole year, a year-on-year increase of 430.66%, and the proportion of total income of the company has also increased. Guosheng Securities analyst Song Jiaji predicts that 2024 will be the golden period of domestic computing power development, and liquid cooling technology will usher in the year of mass production. However, analysts say that there is currently a gap between the industrial end and the secondary market, and manufacturers are looking forward to an increase in market demand. The relevant person in charge of Inspur Electronic Information Industry stated that the company is awaiting an increase in market demand, and that the company is currently in a leading position in terms of production capacity reserves and industry standards, but the specific order volume will depend on customer demand. Sugon Shuchuang revealed in its financial report that the liquid cooling market is still in its early stages, with intense competition leading to a decrease in the company's overall gross profit margin. Despite this, Sugon Shuchuang expects its operating income to increase by 25.63% year-on-year in 2023, reaching 650 million yuan, but its net profit attributable to shareholders is expected to decrease by 10.61% year-on-year, reaching 105 million yuan. Recently, Sichuan Crun, which has been popular in the secondary market, has received orders and deliveries from international and domestic customers for its liquid cooling business, and has expanded its market for liquid cooling products in 2023. Analysts point out that it is uncertain how much performance increment this will bring. The financial report shows that Sichuan Crun is expected to lose 56-66 million yuan in net profit in 2023. Meanwhile, Sichuan Crun's main business (new energy and clean energy, etc.) has been affected by factors such as falling product prices and intensified industry competition, leading to a decline in gross profit margin and net profit.