Guotai Junan released a research report saying that domestic Internet manufacturers and operators will increase their investment in servers, and with the high integration of AI servers, the power consumption will be greatly increased, driving the server cooling scheme to switch to liquid cooling, and the power density of the power supply will continue to increase.

Guotai Junan's main views are as follows:

The demand for AI servers is increasing, and the volume and price of liquid cooling, power supply, and interconnection are all rising

According to IDC, China's AI server market will grow from $19 billion to $55 billion from 2024 to 2028. Domestic cloud vendors and operators are actively promoting the construction of data centers, and the capital expenditure of bytes is expected to exceed 100 billion yuan in 2025.

In order to support more efficient and faster model training and inference requirements, and reduce the impact of data transmission latency between cabinets, the computing power of a single AI server continues to increase, driving the growth of power consumption in a single cabinet, and the power consumption of NVIDIA Rubin architecture server cabinets may reach 1MW.

With the increase in power consumption, data transmission capacity, and transmission rate of AI servers, the requirements for cooling, power supply, and interconnection performance have increased significantly, driving the volume and price of corresponding components to rise.

Liquid cooling has been cost-effective, short-term cold plates may be the mainstream, and domestic breakthroughs in AI server power supplies can be expected

The initial investment cost of liquid cooling is higher than that of air cooling, but it does not require a fan, which can effectively reduce server power and make long-term operating costs more cost-effective. Short-term cold plate liquid cooling will occupy a major share due to its strong single-point heat dissipation capacity, low initial investment cost, and low operation and maintenance difficulty. The power density of AC/DC power supplies will increase due to the increase in the power of AI servers, and the power density of a single power supply may exceed 10 kW in the future.

It is estimated that the scale of China's AI server power supply market will reach 8.334~15.680 billion yuan in 2025, and there is a broad space for domestic substitution. Domestic manufacturers represented by Megmeet and Continental are actively promoting the mass production of 5.5kw AI server power supplies, and domestic breakthroughs can be expected.

The interconnection rate is accelerating, and connectors and copper cables are meeting development opportunities

As more GPUs are integrated into server cabinets, signal transmission between GPUs becomes more and more important. The transmission rate of high-speed backplane connectors and high-speed I/O connectors will be upgraded to 448G/224G. It is estimated that in 2025, the market size of high-speed backplane connectors corresponding to NVL72 and NVL36 alone will reach 7.69 billion yuan.

At present, the gap between domestic connector manufacturers and international leaders is gradually narrowing, and domestic 224G connectors are expected to achieve mass production in 25 years. Copper interconnect is currently the most cost-effective way to transmit within a server cabinet. According to LightCounting, with the mass production of GB200, the global high-speed copper cable market size will increase by about 90% year-on-year to US$1.5 billion in 2025, and the market size is expected to be close to US$3 billion in 2028. The signal rate upgrade drives the copper cable from DAC to AEC. Domestic copper cable manufacturers have a leading layout, have entered the supply chain of international and domestic major customers, and will fully benefit in the future.

Investment Advice:

Recommended targets: Huafeng Technology (688629.SH), Lixun Precision (002475.SZ), Ruida (688800.SH).

Beneficiary target:

1. Liquid cooling: Invic (002837.SZ), Gaolan (300499.SZ), Shenling Environment (301018.SZ), Shuguang Digital Innovation (872808.BJ).

2. Server power supply: Megmeet (002851.SZ), Continental (300870.SZ), China Great Wall (000066.SZ), Taijia (002843.SZ).

3. Connectors: AVIC Optoelectronics (002179.SZ), Dingtong Technology (688668.SH), Yihua (002897.SZ), Yidong Electronics (301123.SZ).

4. High-speed copper cable: Wall Nuclear Materials (002130.SZ), Shenyu Co., Ltd. (300563.SZ), Jinxinnuo (300252.SZ).

Risk warning: The demand for AI servers is lower than expected; Server component technology is not progressing as expected