System1 (SST) is at an industry inflection point from 0 to 1. Similar to the transformative impact of CPO (Co-Packaged Optics) in optical communications, SST is redefining the power supply architecture for data centers—it not only aligns with the future trend of 800V high-voltage DC access but also achieves AC/DC compatibility in the "gray zone" with significantly simplified structure. For small and medium-sized New Cloud companies, SST translates to faster deployment speeds. Although large-scale implementation is expected around 2028, SST has now entered the product validation and introduction phase and is anticipated to serve as the starting point for a new market cycle.
Why is SST considered the "CPO" of the power sector? Traditional distribution transformers rely on bulky silicon steel sheets and copper coils, are large and heavy, and only perform AC voltage transformation. In contrast, SST (Solid-State Transformer) replaces traditional iron cores and copper wires with power electronic devices (such as high-voltage semiconductors like silicon carbide SiC), highly integrating AC/DC rectification, DC/DC conversion, and DC/DC inversion. This reduces volume and weight and breaks down the physical barriers between AC and DC, representing a structural revolution in achieving ultra-high power density power supply for AI data centers. SST: The "CPO" of power supply systems. Just as CPO integrates optical engines with chips to shorten optical links and address bandwidth/power consumption bottlenecks, SST integrates rectification, conversion, and inversion to reduce conversion stages, shorten electrical links, and tackle loss/density/response bottlenecks. The essence of both lies in replacing traditional multi-stage discrete architectures with high integration, thereby lowering power consumption and saving space.
Why does SST align with future trends? SST is not only a cutting-edge technology but also an inevitable choice that addresses the fundamental pain points of future data centers. 800V DC Access: A revolution in link simplification. As AI clusters evolve from MW to GW levels, to reduce bus losses, power supply within server racks is comprehensively upgrading to 800V or even higher voltage DC. Traditional transformers output low-voltage AC, requiring multiple AC/DC conversions through Uninterruptible Power Supplies (UPS) and server power supplies (PSU), resulting in significant losses. SST can directly step down voltage from high-voltage grids and output high-voltage DC, such as 800V, matching server racks. This "direct connection" mode eliminates redundant rectification stages, offering the optimal solution for next-generation AI clusters with high-voltage DC access. "Gray Zone" Structure Simplification: AC/DC Compatibility. The "gray zone" from the power generation side to the data center side in traditional data centers is complex, including UPS, emergency generator sets, switchgear, transformers, cooling systems, and heat exchangers. Leveraging its intermediate DC-link, SST inherently possesses multi-port energy routing capabilities: 1) AC Port: Can directly connect to existing AC loads; 2) DC Port: DC loads such as photovoltaics, energy storage, and AI servers can connect directly, eliminating independent AC/DC conversion stages. This means AC and DC systems in the "gray zone" can be uniformly managed by SST, greatly simplifying the structure and significantly reducing equipment types and quantities.
Empowering New Cloud Companies for Rapid Deployment. For small and medium-sized new intelligent computing cloud service providers (New Cloud / GPU Cloud companies), time is the greatest competitive advantage. Traditional substation and power distribution system construction involves long cycles and high civil engineering requirements. SST adopts prefabricated, modular designs, making it highly suitable for "plug-and-play" and containerized deployment. For New Cloud companies, this addresses the bottleneck in power distribution infrastructure construction, enabling rapid, elastic deployment of standardized modules and significantly shortening AI Data Center (AIDC) delivery cycles.
Viewing the Market Start from the "Validation Phase." Regarding investment timing, there is a perception gap in the market regarding SST, often viewed as a long-term technology, yet industry progress has far exceeded expectations. SST is currently in the "product validation and introduction phase," expected to mark the start of a new market uptrend. Entering 2026, notable developments include: Frequent Industry Actions: Leading power equipment manufacturers (such as Sifang Co., Ltd.) have successively released SST 1.0 products for data centers. Reshaping Valuation Logic: At this stage, SST products are transitioning from "blueprints" to "validation." Similar to the market dynamics of CPO in the optical module sector during initial sampling and testing phases, the "product introduction and validation phase" often represents the period with the greatest valuation elasticity for related concept stocks. SST is not expected to "explode overnight," but 2026 presents the optimal window for observation and strategic positioning.
Risks include slower-than-expected AI development, weaker-than-anticipated computing power demand, and market competition risks.
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