Summary of Conference Call on Liquid Cooling Technology in Data Centers Industry Overview - The conference call focused on the liquid cooling technology in data centers, particularly its application in high-performance computing and the growing demand for efficient cooling solutions due to increasing chip power consumption [1][2]. Key Insights and Arguments - **Market Penetration**: The penetration rate of liquid cooling in GB200 servers is expected to reach 75%, while GB300 is nearing 100%. This indicates a significant increase in liquid cooling adoption by 2026, driven by NVIDIA's GPU series, which is predominantly shipped in liquid-cooled configurations [1][2]. - **Growth Projections**: The GPU cabinet shipment volume is projected to be between 100,000 to 120,000 units by 2026, corresponding to a market size of approximately $10 billion. The ASIC server shipment is expected to reach 8 million units, with a 40% penetration rate translating to a market size of about $3.9 billion. The combined market for GPU and ASIC servers is anticipated to exceed $15 billion, with a compound annual growth rate (CAGR) of around 55% from 2025 to 2026 [1][7]. - **Cooling Technology Trends**: The choice of cooling solutions is primarily based on heat flux density and cabinet power consumption. Liquid cooling is becoming essential for high-power chips, although cost considerations may lead some users to opt for suboptimal solutions like air cooling [1][4]. Important but Overlooked Content - **Supply Chain Dynamics**: The expansion of the liquid cooling market is driving demand for components, with key suppliers such as Chi Hong, Shuang Hong, and Coolmaster ramping up production in Southeast Asia. The main suppliers for CDU (Cooling Distribution Unit) include Weidi and Baode, with Sidecar being the predominant configuration [3][8]. - **Domestic Companies' Prospects**: Domestic firms like Yingweike have entered the supply chains of NVIDIA and Google, positioning themselves as potential leading manufacturers. Yingweike has received order guidance from NVIDIA for 2026, including a 3-4% share of quick connectors, translating to an estimated revenue of $500 million, along with $200 million from CDU contributions [3][9]. - **Technological Advancements**: NVIDIA is developing microchannel liquid cooling technology to enhance cooling efficiency, expected to mature by Q4 2026. Google has implemented advanced cooling techniques that adapt to AI training load fluctuations, ensuring reliable thermal management [5][6]. Conclusion - The liquid cooling technology in data centers is poised for significant growth, driven by increasing power demands of chips and advancements in cooling solutions. The market dynamics indicate a robust expansion of both the technology and the associated supply chain, with domestic players gaining traction in a competitive landscape [1][3][9].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [4]. Core Insights - The company reported Q2 2025 revenue of $2.89 billion, a year-on-year increase of 21%, with a GAAP gross margin of 12.8%, up 2.2 percentage points year-on-year [2]. - The company has raised its full-year revenue guidance for 2025 to $11.55 billion from a previous estimate of $10.85 billion, and expects Non-GAAP EPS to be $5.50, up from $5.00 [2]. - The growth in revenue is primarily driven by the increasing demand for switches, particularly in the communication terminal market, which saw a revenue of $1.641 billion in Q2 2025, a 75% year-on-year increase [3]. - The company anticipates continued growth in the communication terminal market, projecting a year-on-year increase of 60-65% for Q3 2025 [3]. - The company is expected to benefit from the high demand for ASIC servers and Ethernet switches due to the explosion of inference demand [4]. Summary by Sections Performance Review - In Q2 2025, the company achieved a net profit of $211 million, a significant increase of 122% year-on-year [2]. - Non-GAAP net profit for Q2 2025 was $161 million, reflecting a 49% year-on-year growth [2]. Operational Analysis - The company's enterprise terminal market revenue in Q2 2025 was $433 million, down 37% year-on-year, but showed a positive trend compared to Q1 2025 [3]. - The company is positioned to gain more projects as the design and manufacturing complexity of ASIC servers increases [3]. Profit Forecast and Valuation - The projected GAAP net profits for 2025, 2026, and 2027 are $645 million, $781 million, and $1.078 billion, respectively [10]. - The company is expected to maintain a strong customer base, including major clients like Google, Amazon, and Meta, which will support its growth in the data center market [4].