Core Viewpoint - UBS report indicates that Nvidia's statements at CES regarding next-generation chip cooling technology are prompting investors to reassess potential winners and losers in the evolution of data center infrastructure [1] Group 1: Nvidia's New Cooling Technology - Nvidia's description of the upcoming Vera Rubin platform suggests that some high-performance AI systems may no longer rely on traditional mechanical cooling under specific climate conditions, altering the economics of data center heat dissipation [1] - The latest Nvidia chips can operate at higher temperatures, utilizing warm liquid at approximately 43-46 degrees Celsius for cooling without compromising performance, which can then be cooled naturally based on outdoor conditions rather than relying on energy-intensive mechanical cooling [1] - The key change is in the method of heat dissipation rather than a complete elimination of cooling infrastructure [1] Group 2: Beneficiaries of the New Technology - UBS believes that this technological evolution is beneficial for cooling tower and dry cooler manufacturers, which can achieve heat dissipation without compressors [2] - Vertiv (VRT.US) is highlighted as a potential beneficiary due to its dominance in the dry cooler system market with the DX Thermal product line [2] - The impact on Modine Manufacturing (MOD.US) is viewed as "neutral to slightly positive," as its air-cooled chillers can integrate natural cooling features, reducing reliance on compressors when outdoor conditions permit [2] Group 3: Mechanical Chillers Remain Essential - Despite opinions suggesting that Nvidia's chips could render mechanical chillers obsolete, UBS disagrees, asserting that mechanical chillers will remain a core component of data center design for the foreseeable future [3] - Most data centers operate in a hybrid mode, with only some racks dedicated to AI loads, while broader facilities still require traditional air cooling systems [3] - Many installed chips still need air cooling or lower temperature liquid cooling, both of which depend on water-cooled mechanical chillers [3] - Regional factors are crucial, as Nvidia's warm liquid cooling concept may be significantly limited in hot climates like Texas and Arizona, where outdoor temperatures can approach or exceed liquid loop temperatures, reducing the feasibility of natural cooling [3] Group 4: Impact on Comprehensive HVAC Companies - For comprehensive HVAC and industrial equipment companies like Trane Technologies (TT.US) and Johnson Controls (JCI.US), UBS believes that the industry shift driven by Nvidia will have a "neutral to slightly negative" impact [4] - However, it is emphasized that both companies are still expected to achieve significant growth in the coming years, with Johnson Controls' performance improvement primarily stemming from its own margin enhancement plans rather than solely relying on data center business [4] - Overall, UBS interprets Nvidia's CES statements as a gradual innovation for cooling equipment manufacturers rather than a disruptive shock, indicating a redistribution of demand among different technologies rather than a disappearance of demand [4] - Even as natural cooling solutions play a more significant role in specific applications and climate conditions, mechanical chillers will remain an indispensable part of the data center infrastructure ecosystem [4]

Key Insights - The report highlights significant year-on-year revenue growth in Q3, driven by advancements in the semiconductor and AR/VR testing sectors, particularly for companies like Maolai Optics and Junsheng Electronics [4][7] - Companies such as Amazon and Yudong Network have shown resilience in their revenue streams, with Amazon's Q3 revenue reaching $180.2 billion, a 13% increase year-on-year, and Yudong Network's revenue growing by 84.04% in the same period [21][27] - The report indicates a structural shift in the secondary market, with new infrastructure sectors experiencing a favorable market environment despite overall market pressure [18] Group 1: Company Performance - Maolai Optics reported a revenue of 503 million yuan in the first three quarters of 2025, a 34.05% increase year-on-year, with a net profit of 46 million yuan, up 86.57% [4] - Junsheng Electronics achieved a revenue of approximately 154.97 billion yuan in Q3 2025, reflecting a 10.25% year-on-year increase, with a net profit of about 4.13 billion yuan, up 35.4% [7] - Concept Electronics reported a net profit increase of 173.46% year-on-year, with a revenue of 315 million yuan in the first three quarters of 2025 [12] Group 2: Industry Trends - The semiconductor sector is experiencing robust growth, with Maolai Optics reporting that 58.80% of its revenue comes from this field [5] - The report notes a significant increase in new business orders for Junsheng Electronics, with a total of 714 billion yuan in new orders accumulated in the first three quarters of 2025 [9] - The e-commerce sector, particularly Amazon, continues to show resilience, with various revenue streams exceeding expectations, including a 24% increase in advertising service revenue [23][24] Group 3: Future Outlook - Forecasts for Maolai Optics suggest revenues of 673 million yuan, 871 million yuan, and 1.07 billion yuan for 2025-2027, with corresponding net profits of 63 million yuan, 97 million yuan, and 139 million yuan [6] - Junsheng Electronics is expected to achieve revenues of 625.64 billion yuan, 673.16 billion yuan, and 726.56 billion yuan from 2025 to 2027, with net profits projected at 15.39 billion yuan, 18.54 billion yuan, and 21.65 billion yuan [11] - Amazon's revenue is projected to reach $711 billion, $800 billion, and $900 billion for 2025-2027, with net profits of $76.5 billion, $87.9 billion, and $108.9 billion [26]