Bernstein's latest research report on the data center chiller industry shows that concerns are mounting over whether next-generation AI data center architectures will still require chillers, but based on interviews with procurement heads from five hyperscale cloud providers, new cloud service providers, and OEMs, the firm believes chiller demand remains strong, supply remains tight, and there is no short-term "survival crisis" of being replaced.
Bernstein maintains an "Outperform" rating on Trane Technologies (TT.US) with a target price of $555, maintains an "Outperform" rating on Johnson Controls (JCI.US) with a target price of $194, and assigns a "Market Perform" rating on Carrier (CARR.US) with a target price of $63.
Strong demand, tight supply: lead times of up to approximately 12 to 18 months
Experts point out that chiller lead times reach as long as approximately 12 to 18 months and have generally lengthened over the past roughly 1 to 1.5 years. The bottleneck lies not only in OEM production capacity but also involves key subcomponents such as fans, compressors, and controls, as well as customization and engineering requirements. Some relief may emerge as OEMs expand production and subcomponent procurement constraints ease, but supply remains tight in the near term.
Johnson Controls scores highest among large chiller/HVAC OEMs
In Bernstein's expert scorecard, Johnson Controls ranks highest overall, with Carrier and Trane close behind. Johnson Controls received particularly positive feedback on product/service capabilities, including its extensive field service network. Carrier also performed well on service capabilities, but feedback on functionality/delivery was more mixed. Trane's product functionality/quality remains solid, but experts rated its cost/delivery lower, with one expert citing supplier purchase order delays/internal coordination issues (related to Stellar's chiller manufacturing division). Japan's Daikin is generally regarded as cost-competitive with solid functionality/quality, but delivery feedback was mixed.
Service matters, but it is not an OEM moat
OEMs remain the first choice for in-warranty/mission-critical work, but most experts are willing to use third-party service providers after the warranty period, citing greater bandwidth, faster response, stronger geographic proximity, and sometimes lower costs. One expert believes third-party service providers are better able to meet strict response time requirements (some hyperscale cloud providers require approximately 4 hours). This echoes Bernstein's earlier review of the chiller OEM service landscape: Johnson Controls has the largest North American commercial service network with 270 locations, Trane has 143, and Carrier has 88, though all three cover the vast majority of existing data center capacity (more than approximately 80% within a 30-mile radius).
Chillers will not disappear in the near term, but marginal demand may decline
Experts unanimously point out that, constrained by factors such as climate, workload mix, and reliability/redundancy requirements, chillers cannot be fully replaced in the near term. Dry coolers perform poorly in hotter climates (such as Phoenix and Dallas), not all workloads use liquid cooling, and mechanical refrigeration remains relevant for broader facilities and electrical equipment. As a result, the operators interviewed continue to budget for chillers in future designs under multi-year roadmaps.
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