Huayuan Securities released a research report stating that as global AI capital expenditure expands and AI infrastructure investments continue, diesel generators, as a power generation component, are expected to directly benefit from the increased demand for global AI data center (AIDC) construction. Diesel generators account for approximately 6%-7% of the total data center construction cost. According to NERC forecasts, as AIDC power demand increases, U.S. data center power load is projected to reach 70GW by 2030, with an average annual peak power shortfall exceeding 20GW from 2027 to 2030. The high demand for diesel generators as critical backup power sources for data centers is likely to persist. On the supply side, tightness in overseas supply chains has already emerged. Domestic suppliers are expected to gradually increase their global market share by leveraging advantages in pricing and delivery times. The main views of Huayuan Securities are as follows:
Diesel generator sets are one of the key power sources for data centers. Data center power supply systems typically consist of the "grid + UPS + diesel generator sets," with diesel generators serving as backup power. In the event of a mains power failure, they quickly start to provide backup power for downstream low-voltage equipment, maintaining longer operational uptime for data centers. A diesel generator set comprises a diesel engine, a generator, and auxiliary systems (such as cooling and control systems). The diesel engine is the core component, consisting of high-pressure fuel injection systems, turbocharging systems, crankshafts, connecting rods, and cylinder assemblies, accounting for about 60-70% of the total cost.
Demand is higher overseas than domestically, with significant growth potential domestically. With the expansion of global AI capital expenditure and ongoing AI infrastructure investment, diesel generators are poised to benefit directly from the rising demand for global AIDC construction. The global diesel generator market is projected to reach approximately $22.6 billion by 2026, with $19.6 billion overseas and $3.0 billion domestically. This corresponds to a global demand of about 42,000 units, comprising 35,600 units overseas and 6,600 units domestically.
Key incremental demand drivers to monitor include: 1) Power shortages in North America: According to NERC, U.S. data center power load is forecast to hit 70GW by 2030 due to increasing AIDC power demand, with an average annual peak power deficit of over 20GW from 2027-2030, sustaining high demand for diesel generators as essential backup power. 2) Domestic AIDC construction: Starting Q4 2025, tenders for AIDCs by major domestic companies have rebounded. By 2026, with continuous iteration of domestic large models and rising token consumption, coupled with optimistic AI capital expenditure guidance from major domestic firms, the high demand for domestic AIDC construction is expected to continue, potentially boosting diesel generator demand.
On the supply side, import substitution is accelerating, with potential for price and profit increases. The global data center diesel generator market is dominated by foreign companies such as Cummins, MTU, and Caterpillar. These foreign firms have long and cautious expansion cycles, and current overseas supply chain tensions are evident. Domestic suppliers are expected to gradually increase their global market share through competitive pricing and shorter delivery times. Furthermore, the average unit price domestically is close to 3 million RMB. Since 2024, diesel generator prices have continued to rise, with units using overseas engines seeing price increases of about 20%. Fully foreign-made units now exceed 3 million RMB per unit. Against this backdrop of supply shortages, domestic diesel generator suppliers have room to increase both their delivery prices and profits.
Recommended investment targets include: 1) OEMs: Weichai Heavy Machinery (000880.SZ), Sumec (600710.SH), CTG Power (300153.SZ), Tellhow Sci-Tech (600590.SH), etc.; 2) Engine manufacturers: Weichai Power (000338.SZ, 02338), China Yuchai International (CYD.US), PowerNew Co (600841.SH), etc.; 3) Core component suppliers: Yinlun (002126.SZ), Tianrun Industry (002283.SZ), Changyuan Donggu (603950.SH), Zhongyuan Nei配 (002448.SZ), Weifu High-Technology (000581.SZ), Bohai Automotive (600960.SH), Sanlian Forging (001282.SZ), Aikelan (300816.SZ), etc.
Risk factors include: 1) Slower-than-expected progress in the AI industry; 2) Risks associated with technological iteration; 3) Intensifying industry competition; 4) Potential deviations in market demand calculations.
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