Industry Overview - The data center cooling market is expected to grow at a CAGR of 12.8% from 2023 to 2030, driven by the demand for coolant architectures for AI and high-performance computing [1]. Company Analysis: Super Micro Computer (SMCI) - SMCI's server and storage revenues are significantly supported by its direct liquid cooling products, achieving a production volume of over 2000 DLC racks per month [3]. - The company launched DLC-2 technology in May 2025, which offers features such as water and space savings, noise reduction, and a potential reduction in electricity costs by up to 40% [4]. - SMCI is currently facing challenges, including delayed purchasing decisions from customers and margin contraction due to increased competition from established players like HPE and Dell Technologies [5]. - The Zacks Consensus Estimate for SMCI's fiscal 2025 earnings is $2.07 per share, reflecting a year-over-year decline of 6.3% [5][6]. Company Analysis: Vertiv (VRT) - Vertiv has a robust thermal management portfolio, providing various cooling solutions that optimize performance and power utilization [7]. - The company is projected to achieve 24.91% EPS growth in FY25, driven by strong demand for AI cooling solutions [7][10]. - Vertiv continues to invest in research and capacity expansion to meet the growing needs of AI infrastructure, including the development of high-density cooling solutions for NVIDIA's platforms [9]. - The Zacks Consensus Estimate for Vertiv's fiscal 2025 revenues is $9.52 billion, indicating year-over-year growth of 18.8%, with earnings estimated at $3.56 per share, reflecting a growth of 24.91% [10][11]. Stock Performance and Valuation - Year-to-date, shares of SMCI have increased by 65.2%, while VRT shares have gained 6.3% [12]. - SMCI is trading at a forward Price to Sales ratio of 1.01X, above its median of 0.83X, whereas VRT is trading at a forward sales multiple of 4.5X, higher than its median of 4.25X [13]. Conclusion - Both SMCI and VRT are benefiting from the growth in cooling technology due to AI workloads and high-performance computing [16]. - However, VRT's financial metrics suggest it is a stronger investment choice compared to SMCI, which currently holds a Zacks Rank of 3 (Hold) versus VRT's 2 (Buy) [16].

Investment Rating - The report maintains a "Buy" rating for Lingyi, with a 12-month price target of Rmb11.40, indicating an upside potential of 28.1% from the current price of Rmb8.90 [18][13]. Core Insights - Lingyi's revenues are expected to grow by 23% year-over-year in 2Q25, reaching Rmb11.5 billion, driven by new project contributions and improved seasonality in the second half of 2025 [1][3]. - The gross margin (GM) is projected to improve to 15.7% in 2Q25, up from 15.2% in 1Q25, although still below the 2022/2023 levels of 20.7% and 19.9% respectively [1][3]. - Lingyi's diversification into foldable phones, servers, and AI/AR glasses components is expected to increase revenue contributions to 14% and 18% in 2025 and 2026 respectively [1][2]. Revenue and Earnings Estimates - Revenue estimates for 2025 remain unchanged at Rmb54.5 billion, with net income expected to grow by 43% year-over-year [3][9]. - Earnings revisions indicate a decrease in net income estimates by 11% for 2025, primarily due to lower GM from the automotive and server segments [3][7]. - The report anticipates a compound annual growth rate (CAGR) of 21% in revenues from 2025 to 2027 [3][9]. Financial Metrics - The report projects gross margins to expand from 15.8% in 2024 to 16.6% and 18.2% in 2025 and 2026 respectively [3][11]. - Operating profit margins (OPM) are expected to improve from 6.0% in 2025 to 8.1% in 2027 [3][11]. - The net margin is forecasted to increase to 4.6% and 5.7% in 2025 and 2026 respectively [3][11]. Market Position and Competitive Landscape - Lingyi is expanding its business in foldable phones, servers, robotics, and AI/AR glasses components to reduce concentration risk and capture a larger market share [2][3]. - The company has established partnerships to provide comprehensive manufacturing solutions, which are expected to lower the bill of materials (BOM) costs for clients [2][3]. Valuation - The target price of Rmb11.4 is based on a target P/E multiple of 21.2x 2026E EPS, reflecting a positive correlation between P/E and EPS growth among peers [11][17]. - Lingyi is currently trading at a P/E of 17x for 2026E, which is considered attractive [13][17].

Core Viewpoint - Vertiv is facing potential competition from Amazon in the cooling technology sector, which has led to a decline in its stock price by 7.3% following the news [1][2]. Group 1: Competition and Market Dynamics - Amazon is advancing in liquid cooling technology for its P6e-GB200 Ultra Servers, which enhances compute density and supports Nvidia Blackwell GPUs on AWS [3][4]. - The new custom liquid cooling system developed by Amazon was created in just 11 months and is now being deployed, indicating a significant move into the cooling technology space [4]. - Amazon has evaluated multiple liquid cooling solutions from other vendors but found them unsuitable for AWS, which may indirectly reference Vertiv [5]. Group 2: Implications for Vertiv - Vertiv's stock has increased approximately tenfold since 2022, largely benefiting from the AI boom, and it reported a 25% organic net sales growth in the first quarter [6]. - While Vertiv's near-term prospects appear solid, the entry of Amazon into the cooling technology market could pose challenges to its growth trajectory [6].

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Group 1 - Vertiv's shares increased by 19% in June, driven by positive news from partners like Nvidia, alleviating concerns over data center capital spending slowdown [1] - The debate between bulls and bears highlights differing views on the sustainability of AI and data center spending, with bears anticipating a correction and bulls believing spending is still in early stages [2][3] - Vertiv raised its full-year 2025 sales guidance to a range of $9.325 billion to $9.575 billion, indicating confidence in future performance despite a flat year-over-year order book in Q4 2024 [4] Group 2 - Nvidia reported a 73% year-over-year increase in data center-related revenue in Q1 2026, suggesting strong underlying market growth [7] - Vertiv's products are not subject to the same export control regulations as Nvidia, although rising costs from sourcing in Mexico and China pose challenges [8] - Overall, the confirmation of ongoing growth in Vertiv's end markets positively impacted its stock performance in June, positioning it well to benefit from the data center spending boom [9]

Core Insights - Super Micro Computer's stock has surged nearly 10x over the last three years, driven by demand for server systems linked to generative AI, despite facing an 80% drawdown in 2024 due to regulatory concerns and accounting allegations [2] - The company is projected to grow its revenue by nearly 48% to $22 billion in FY'25 and by 35% to around $30 billion in FY'26, supported by strong expenditure on data center services [3][4] - Super Micro's competitive advantages include customizable and energy-efficient products, with expectations that liquid-cooling systems will be installed in 30% of server racks shipped next year [5] Revenue Growth - Super Micro is expected to achieve significant revenue growth, with projections of $22 billion in FY'25 and $30 billion in FY'26, driven by tech companies enhancing AI capabilities [3] - The company is positioned to benefit from Nvidia's increased production of Blackwell GPUs, which will likely boost demand for its servers [3][4] Competitive Position - Super Micro's products are closely integrated with Nvidia's GPU ecosystem, allowing it to quickly provide compatible server systems [4] - The company is enhancing its production capacity and is expected to see a shift towards higher-end products, particularly in liquid cooling technology [5] Margin Improvement - Adjusted net margins are projected to improve from 6.4% in the first nine months of FY'25 to approximately 12% by FY'28, driven by economies of scale and a favorable product mix [7][8] - The company has effectively addressed technical challenges associated with liquid cooling, which may provide a competitive edge in the AI hardware market [8] Valuation and Earnings Potential - If revenues increase by 2.5x and margins double by FY'27, earnings could rise by about 5x, potentially stabilizing the P/E multiple around 10x [9] - This scenario could lead to Super Micro's stock price exceeding $100 per share in the medium term, contingent on continued revenue growth and margin improvement [9]

Core Insights - Vertiv (VRT) is showing strong upward momentum, trading above its 200-day and 50-day simple moving averages, indicating price stability and a long-term bullish trend [2][5] - The stock has gained 13% year-to-date, outperforming the broader Zacks Computer and Technology sector's increase of 6.1% and its closest peer, Eaton (ETN), which gained 7.6% [6] - Vertiv's extensive product portfolio and strong order growth, with organic orders increasing approximately 20% and a backlog of $7.9 billion, highlight its robust market position [7][9] Financial Performance - For 2025, Vertiv raised its revenue outlook to between $9.325 billion and $9.575 billion, with expected organic net sales growth of 16.5% to 19.5% [15] - The second-quarter 2025 revenue is projected to be between $2.325 billion and $2.375 billion, with organic net sales expected to increase by 19% to 23% [16] - The Zacks Consensus Estimate for Vertiv's 2025 revenues is pegged at $9.51 billion, suggesting an 18.71% year-over-year growth [18] Strategic Partnerships - Vertiv's partnership with NVIDIA is a key catalyst, enhancing its AI-ready cooling and power solutions for next-generation data centers [11][12] - The collaboration with Tecogen to offer advanced natural gas-powered chiller technology further strengthens Vertiv's portfolio [13][14] Valuation Metrics - Vertiv is currently trading at a trailing 12-month Price/Book ratio of 18.35X, significantly higher than the broader sector's 10.12X and Eaton's 7.53X [20] - Despite being overvalued, the company's strong portfolio and partner base justify its premium valuation [21]

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Investment Rating - Buy: Hon Hai, Wiwynn, Wistron, Gigabyte, ASUS, AVC; Neutral: Quanta, Inventec [8] Core Insights - The average year-over-year revenue growth for ten companies in the AI servers and AI PCs supply chain is expected to be +37% in June 2025, +27% in July 2025, and +18% in August 2025, driven by the ramp-up of AI servers and new product launches [1] - Rack-level AI servers are transitioning models, which may impact revenue growth in the second half of 2025 [1] - Geopolitical uncertainties are causing changes in end market demand, leading to a slower month-over-month growth forecast of -6% in June, -8% in July, and +2% in August 2025 [1] Company Summaries Hon Hai - Expected 2Q25 revenues to grow 17% YoY to NT$1,813 billion, driven by AI server demand and tariff-related consumption pull-ins [13] - May revenues were 6% below estimates, affected by slower customer pull-in momentum and negative exchange rate impacts [13] - Maintain Buy rating with a target price of NT$242 based on a 14.9x 2026E P/E multiple [15] Quanta - Anticipated 2Q25 revenues to grow 57% YoY to NT$488 billion, supported by AI server ramp-up [20] - May revenues were 13% below estimates, with a decline in notebook shipments [20] - Maintain Neutral rating with a target price of NT$273 based on a 12.8x 2026E P/E [23] Wiwynn - Expected 2Q25 revenues to grow 161% YoY to NT$202 billion, driven by strong demand for ASIC AI servers [38] - May revenues were 34% higher than estimates, reflecting continued strong demand [39] - Maintain Buy rating with a target price of NT$3,838 based on a 20.5x 2026E P/E [42] Wistron - Expected June revenues to grow 123% YoY to NT$198 billion, driven by AI server demand [47] - Strong revenue in May, up 162% YoY, supported by new product cycles [44] - Maintain Buy rating with a target price of NT$152 based on a 14.8x 2026E P/E [49] Gigabyte - Expected 2Q25 revenues to grow 32% YoY to NT$97 billion, supported by AI servers and VGAs [50] - May revenues were 79% above estimates, reflecting tariff-related pull-ins [51] - Maintain Buy rating with a target price of NT$344 based on a 14.0x 2026E P/E [55] AVC - Expected 2Q25 revenues to grow 67% YoY to NT$27 billion, driven by liquid cooling business [27] - May revenues were higher than estimates, reflecting the rising trend in liquid cooling [27] - Maintain Buy rating with a target price of NT$878 based on a 20.0x 2026E P/E [37] ASUS - Expected 2Q25 revenues to grow 21% YoY to NT$175 billion, supported by AI and gaming PCs [57] - May revenues were up 41% YoY, exceeding estimates [62] - Maintain Buy rating with a target price of NT$849 based on a 14.6x 2026E P/E [63] Inventec - Expected June revenues to be similar to May, supported by AI server ramp-up [65] - Maintain Neutral rating with a focus on AI server revenue contribution [65]