Driven by computing power demands, the global data center construction boom continues with North America and China as core growth regions. While overseas industry leaders still have substantial pending projects, China's market is expected to rebound after temporary slowdowns caused by restricted imports of computing chips.
In the supply chain, gas turbines benefit from North America's energy bottlenecks and order growth, showing clear upward trends in both volume and pricing. Diesel generator sets are gaining market share through delivery advantages, with significant potential for domestic substitution and overseas expansion. Cooling systems are undergoing upgrades as single-rack power requirements increase, with liquid cooling technology seeing rapid adoption and driving substantial growth in mechanical equipment investments.
Key observations from CMSC's research:
Demand Side: The data center expansion is primarily led by North American AI giants and Chinese internet majors. North American leaders' capital expenditures grew from $24.1 billion in Q2 2023 to $76 billion projected for Q3 2025, while Chinese companies reached a peak of RMB 77.2 billion in Q4 2024. The U.S. data center power demand is forecast to account for 6.7%-12% of total electricity consumption by 2028.
Supply Side: North America faces dual challenges of aging grid infrastructure and energy transition, with the world's oldest gas turbine fleet and widening power supply-demand gaps pushing electricity prices higher. China's main constraints involve restricted imports of computing chips and overseas equipment, making domestic substitution crucial. While China's market will shift to demand-driven dynamics by 2026, North America's energy constraints will persist.
Key Investment Areas: 1. Gas Turbines: Focus on upstream components (Yingliu Co., Ltd. (603308.SH)), HRSG manufacturers, domestic substitution plays (Shanghai Electric (601727.SH)), and service providers (Jereh Group (002535.SZ)).
2. Diesel Generators: Benefiting from delivery advantages, domestic manufacturers are capturing overseas spillover orders. Key opportunities include localization (Weichai Heavy Machinery (000880.SZ)) and export-oriented players (Cooltech Power (300153.SZ)).
3. Cooling Systems: Rising single-rack power requirements are making liquid cooling essential rather than optional, significantly increasing mechanical equipment investment share. Focus areas include compressor manufacturers (Hanbell Precise Machinery (002158.SZ)), liquid cooling solution providers, and core component suppliers (Wellong Holdings (002871.SZ)).
Risk Factors: - Potential slowdown in capital expenditures by global AI leaders - Prolonged China-U.S. trade tensions restricting computing chip supply - Slower-than-expected growth in single-rack power requirements - Domestic diesel generator capacity expansion falling short of projections - Weaker-than-anticipated demand growth for computing applications
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