5 January 2026 Asia Tech Hardware Asia Tech Hardware 2026 Outlook: AI drives growth, but risks demand selectivity Alex Wang, CFA +852 2123 2613 alex.wang@bernsteinsg.com Shirley Yang, CFA +852 2123 2660 shirley.yang@bernsteinsg.com Ethan Xu +852 2123 2634 ethan.xu@bernsteinsg.com AI remains the key theme to play in 2026, though sentiment will stay volatile as new targets and bottlenecks emerge. We expect GPU AI server shipment to grow at a 31% CAGR in 2025-27E, driving the total server market to reach c. US ...

Investment Rating - The report indicates a positive outlook for the data center infrastructure industry, suggesting that it is too early to fade the current infrastructure cycle, which has accelerated significantly recently [1][2]. Core Insights - The data center infrastructure build-out is progressing beyond expectations, with a large pipeline indicating demand far exceeding supply, and a projected annual run rate of over 12 GW pre-leased by 2025 [2][3]. - The industry is consolidating on cooling technologies, with major players enhancing their offerings in liquid cooling systems, which are becoming foundational for future data center operations [3][7]. - The report highlights that two-thirds of new capacity is driven by AI build-outs, emphasizing the critical role of AI in fueling incremental demand for data center infrastructure [7][8]. Summary by Sections Industry Overview - The current cycle is described as year 2 of a 7-year cycle, with expectations of over 6 GW being turned on this year, and significant future demand indicated by pre-leasing activity [2][4]. - The report notes that construction lead times will prevent a rapid overbuilding scenario, as physical constraints in construction remain significant [2][3]. Technology Trends - The industry is witnessing a shift towards higher voltage and DC architectures, which could disrupt traditional components and enhance efficiency [3][7]. - Liquid cooling is projected to grow from 10% to 20-30% of the value in thermal management systems, indicating a significant market opportunity for advanced cooling solutions [13][15]. Company Positioning - VRT is identified as a well-positioned industry leader, with strong pipelines and customer demand, while ETN is expected to gain market share following strategic acquisitions [4][7]. - JCI is focusing on technical differentiation and manufacturing capacity, with a robust backlog and pipeline indicating strong demand for their solutions [12][15]. Market Dynamics - The report emphasizes the importance of power availability as a natural constraint against overbuilding, with local government support playing a role in mitigating resistance to new data center projects [7][8]. - The competitive landscape is evolving, with new entrants and increased commoditization driven by standardization efforts, particularly from major players like NVIDIA [7][8].

Summary of Key Points from the Conference Call Industry Overview - The conference focused on the **Data Center Infrastructure** industry, particularly the developments and trends in cooling and power solutions for data centers, with a positive outlook on demand and infrastructure spending [1][4][9]. Core Insights and Arguments - **Strong Demand and Infrastructure Commitment**: The demand for data center infrastructure remains robust, with capital spenders committed to long-term investments, driven by productivity and diverse business models [1][4]. - **Technology Evolution**: Continuous advancements in cooling (CDUs) and power (HVDC) technologies are favoring major players, with larger format solutions becoming more prevalent. Smaller vendors are struggling to compete due to price pressures [1][4][9]. - **Competitive Landscape**: The competition is increasingly concentrated among larger, established players, with a growing moat around successful technology providers. The bear case of disruption and price pressure is being challenged by the emergence of critical partnerships and solutions [1][4][9]. - **AI and Infrastructure**: AI applications are driving demand for data centers, with companies like Microsoft highlighting the need for infrastructure that can support evolving AI workloads. The current demand exceeds supply, reinforcing the need for continued infrastructure investment [9][11]. Company-Specific Highlights Vertiv (VRT) - **Product Offerings**: Vertiv showcased AI-ready racks, modular power solutions, and advanced liquid cooling systems, emphasizing their comprehensive technology portfolio across power, cooling, and modular solutions [5][6]. - **Service Capabilities**: Vertiv has built a significant service organization with over 4,400 technicians globally, enabling them to provide lifecycle services and rapid response to customer needs [11][12]. - **Innovative Solutions**: The introduction of predictive maintenance services and advanced fluid management capabilities positions Vertiv as a leader in optimizing data center operations [12][11]. - **Power Management**: Vertiv is actively supporting the transition to 800V power systems, which will enhance efficiency and scalability for future data center architectures [13][9]. nVent - **New Product Launches**: nVent introduced a new portfolio of modular data center liquid cooling solutions, emphasizing reliability and user experience through a common control platform [18][19]. - **Market Positioning**: The company is participating in initiatives like Project Deschutes to accelerate liquid cooling adoption, positioning itself as a key player in the evolving data center landscape [20][19]. Motivair (Schneider Electric) - **Growth Projections**: Motivair is expected to achieve around $300 million in revenues, reflecting over 100% growth from the previous year, driven by its end-to-end liquid cooling portfolio [22]. - **Integration with Schneider**: The integration with Schneider Electric enhances Motivair's capabilities in deploying optimized electrical infrastructure alongside liquid cooling solutions [22]. Modine - **Innovative Chiller Design**: Modine announced a new stainless steel variant of its TurboChill DCS chiller, designed for high-pressure environments and optimized for liquid cooling systems [26]. - **Market Demand**: The company is experiencing strong demand, with significant orders anticipated from innovative hyperscalers, projecting potential revenues in the $250 million range [26]. Eaton - **HVDC Transition**: Eaton is preparing for the HVDC transition with new products and technologies that will support future data center power needs [27][28]. Boyd - **Advanced Cooling Technologies**: Boyd showcased its Chip to Ambient thermal circuit, designed to optimize energy consumption in liquid cooling systems for AI applications [29][30]. Additional Important Insights - **Market Dynamics**: The data center infrastructure market is witnessing a shift towards larger, more efficient cooling solutions, with significant growth expected in the adoption of CDUs and liquid cooling technologies [36]. - **Collaboration and Partnerships**: Companies are increasingly forming partnerships to enhance their product offerings and address the challenges of high-density computing environments [19][22]. - **Future Trends**: The industry is moving towards more integrated solutions that combine power and cooling, with a focus on modularity and scalability to meet the demands of modern AI workloads [25][29]. This summary encapsulates the key points discussed during the conference call, highlighting the positive outlook for the data center infrastructure industry and the strategic positioning of major players within it.