Nomura, a Japanese bank, highlights the increasing importance of liquid cooling technology for meeting the artificial intelligence (AI) server requirements of Nvidia and other major tech companies. While air cooling has traditionally been used, its capacity is nearing its limits, prompting a shift toward liquid cooling to enhance power and cost efficiency in data centers. Nomura emphasizes that liquid cooling is becoming vital, particularly with Nvidia’s upcoming GB200 AI graphics processor set for release later this year.
Projections from Nomura indicate a significant rise in the adoption of liquid cooling in Nvidia’s AI servers, with penetration rates expected to grow from 8% in 2024 to 43% in 2025, and 47% in 2026. The surge in AI product and service development is resulting in the rapid expansion of AI data centers, which require substantial computing power. Morgan Stanley, in an earlier report, indicated that liquid cooling systems could address power shortage issues in these data centers, potentially reducing capital expenditures by 10% to 15%.
Jefferies is optimistic about the prospects of four Asian stocks poised to benefit from the liquid cooling trend:
1. AVC: Jefferies projects that AVC will secure at least a 50% market share in cold plate orders from top cloud service providers for Nvidia’s G200. Cold plates are crucial for transferring heat away from devices to cooling systems. Jefferies set a price target for AVC at 743 Taiwan dollars ($23.20), suggesting a 30% potential increase.
2. Auras: Auras, which supplies cold plates to Super Micro Computer, is also benefiting from the AI boom. The Taiwan-based company is noted for enabling Quanta’s coolant distribution units for Meta. Jefferies gave Auras a price target of 797 Taiwan dollars, implying a 25% potential increase.
3. Delta: The Taiwanese firm Delta is expected to gain market share in liquid cooling content from major firms like Microsoft, Meta, and Amazon Web Services. Jefferies set a price target of 490 Taiwan dollars for Delta, indicating a 25% potential increase.
4. Nidec: As a key provider of coolant distribution units to Super Micro Computer, Nidec is aggressively expanding this business. Jefferies set a price target for Nidec at 9,000 Japanese yen ($62.60), suggesting a 53% potential increase.
This report also credits CNBC’s Michael Bloom for additional contributions.
