CITIC Securities: AI computing power drives the upgrade of cooling architecture, with liquid-cooled primary side equipment undergoing a reassessment of value

CITIC Construction Investment Research reports that the high-density AI computing power is driving the upgrade of data center cooling architectures, with liquid cooling on the primary side becoming the new valuation focus. Liquid cooling architectures significantly raise the requirements for low temperature, stability, and controllability of the cooling source, transforming the primary system from an auxiliary component into a core infrastructure. Among primary cooling equipment, chillers and compressors are especially critical. As the chiller serves as the main cooling source providing all-weather backup cooling, the compressor—its core power component—directly determines the total cooling capacity, energy efficiency, and operational stability of the system. As data center cooling systems upgrade toward medium-temperature high-efficiency, large cooling capacity, and magnetic levitation centrifugal technology, the value, technical barriers, and industry concentration of chillers and compressors are rising in tandem. Companies with independent technology in magnetic levitation centrifugal compressors and leading chiller manufacturers with large cooling capacity products entering mainstream supply chains will continue to benefit.

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CITIC Construction Investment: AI Computing Power Drives Cooling Architecture Upgrades, Liquid Cooling Primary Side Equipment Reassessed

The increasing density of AI computing power is shifting data center cooling from air cooling to liquid cooling. Liquid cooling architectures greatly enhance the requirements for low temperature, stability, and controllability of the cooling source, elevating the primary system from an auxiliary component to a core infrastructure. In primary cooling equipment, chillers and compressors are especially vital. The chiller acts as the main cooling source, providing all-weather backup cooling, while the compressor—its core power component—directly influences the total cooling capacity, energy efficiency, and operational stability of the entire system. As data center cooling systems upgrade toward medium-temperature high-efficiency, large cooling capacity, and magnetic levitation centrifugal technology, the value, technological barriers, and industry concentration of chillers and compressors are rising simultaneously. Companies with autonomous technology in magnetic levitation centrifugal compressors and leading chiller manufacturers with large cooling capacity products entering mainstream supply chains will continue to benefit.

AIGC drives explosive growth in cooling demand; liquid cooling has become the preferred solution

The AIGC wave accelerates the iteration and commercialization of AI large models, with computing power needs at both training and inference stages growing exponentially. This directly triggers a burst in global AI data center (AIDC) construction. Major domestic and international tech companies are significantly increasing capital expenditure on computing power, supporting AIDC development. The global and domestic AIDC markets continue to expand, with high-power-density large and ultra-large computing centers becoming future construction priorities. Meanwhile, the power density per cabinet in AIDC is rising continuously. Traditional air cooling technology can no longer meet the cooling needs of high-density computing power. Coupled with tightening global data center PUE standards under the “dual carbon” goals, liquid cooling technology—with its low energy consumption, high heat dissipation efficiency, excellent operational conditions, and low lifecycle costs—has become the preferred solution for AIDC cooling systems. The resonance of three factors—AIGC-driven demand, increasing power density, and stricter PUE controls—accelerates the demand for liquid cooling, laying a solid foundation for rapid industry growth.

The importance of primary side liquid cooling is rising, with chillers and compressors becoming core components

AIDC liquid cooling systems are divided into primary and secondary sides by the CDU (cooling distribution unit). The primary side, as the outdoor cooling source, handles heat dissipation and directly determines the data center’s PUE and TCO. It works in concert with the secondary side to complete the full cooling cycle. As the key link connecting internal heat exchange and external heat dissipation, the primary side cooling solution’s importance is increasingly evident. There are three main configurations for primary side cooling: chillers as backup sources, which are indispensable core components with the highest value and technological barriers; and compressors, the “heart” of chillers, accounting for over 50% of costs and about 72% of energy consumption. Due to the significant differences in demand between traditional IDC and AIDC, screw compressors and traditional centrifugal compressors show shortcomings in efficiency, cooling capacity, and stability. Magnetic levitation centrifugal compressors, with advantages such as oil-free operation, high efficiency, wide load regulation, and precise temperature control, are perfectly suited for AIDC liquid cooling needs and have become standard in new high-density intelligent computing centers.

Demand explosion and technological breakthroughs are reshaping the industry landscape through domestic substitution

As AIGC drives rapid growth in global computing infrastructure, data center computing density continues to rise, accelerating cooling demand. As core equipment, chillers and compressors directly impact data center PUE and overall TCO, industry demand is continuously releasing. Currently, the high-end global primary side equipment market is dominated by American giants like Carrier, Trane, York, and McQuay, as well as Denso, a leader in magnetic levitation technology. Foreign companies leverage advantages in technology, branding, and customer resources to dominate high-end supply, but face issues such as high prices, long delivery cycles, insufficient localization, and capacity constraints, creating opportunities for domestic firms. Supported by policies and demand growth, domestic manufacturers have made breakthroughs in core technologies such as magnetic levitation bearings, high-speed motors, and control systems. With high cost-performance ratios, rapid delivery, and localized services, they are steadily penetrating mid-to-high-end markets, accelerating domestic substitution in chillers and magnetic levitation centrifugal compressors. Looking ahead, as liquid cooling becomes more widespread and industry structure reshapes, domestic leaders with core technologies and large-scale delivery capabilities are expected to see both market share and profitability increase.

Investment recommendations: AIDC liquid cooling primary side systems are now a critical, high-value, high-barrier segment of AI computing infrastructure. The industry is in a stage of rapid penetration, technological upgrade, and domestic substitution driven by three resonant factors. The high-density AI computing power is shifting data center cooling from air to liquid, with the cooling source’s low-temperature output, continuous stability, and precise controllability greatly enhanced, transforming the primary system from an auxiliary component into a core infrastructure. In liquid cooling primary systems, chillers and compressors, which bear the core cooling and power functions and align with the trend of high-efficiency cooling sources, are increasingly important. Chilllers provide all-weather backup and stable cooling, making them indispensable; compressors, as the only working component of chillers and the “power heart,” account for over 50% of value and directly determine cooling capacity, energy efficiency, and operational stability. As liquid cooling penetration deepens and single cabinet power continues to rise, data center cooling sources are accelerating toward medium-temperature high-efficiency, large cooling capacity, and magnetic levitation centrifugal technology, prompting iterative upgrades from traditional screw to magnetic levitation centrifugal solutions. The value, technological barriers, and industry concentration of these components are rising in tandem.

It is recommended to focus on high-value, high-barrier segments of AIDC liquid cooling primary systems, with two main strategies: ① core targets for magnetic levitation centrifugal compressors—prioritize companies with autonomous breakthroughs in magnetic levitation bearings, high-speed permanent magnet motors, and control systems, with products validated by customers and entering mass supply, to benefit from technological iteration and domestic substitution; ② leading manufacturers of large-capacity chillers—focus on companies with large cooling capacity models and system solutions tailored for AIDC scenarios, already integrated into mainstream cloud and computing center supply chains, to benefit from industry expansion and market consolidation.

(Source: People’s Financial News)