Chinese Internet Data Centre Sector_Chart of the day_ how to convert hyperscalers' capex to IDC EBITDA_

Summary of the Chinese Internet Data Centre Sector Conference Call Industry Overview - The conference call focused on the Chinese Internet Data Centre (IDC) Sector and its relationship with hyperscalers' capital expenditures (capex) [2][8]. Key Points and Arguments 1. Hyperscalers' Capex to IDC EBITDA Conversion: - A simplified calculation indicates that incremental IDC EBITDA is at least 3% of hyperscalers' total capex [2][4]. - For example, if a hyperscaler spends Rmb100 billion on capex, it could translate to Rmb3 billion in incremental IDC EBITDA [2][4]. 2. Factors Affecting Calculations: - Several factors can influence the final results, including: - A higher mix of CPU or domestic GPU servers may increase total MW [3]. - Data centers located in tier 1 cities may have higher IDC capex per MW and EBITDA [3]. - Data centers in remote areas may have lower IDC capex per MW [3]. 3. Detailed Calculation Breakdown: - The report provided a detailed breakdown of the calculation: - Total server capex: Rmb100 billion - Average selling price per server: Rmb1 million - Total number of servers: 100,000 - Average power density: 7.5 kW/unit - Total server power: 750 MW - Total IT power: 833 MW - IDC capex per MW: Rmb30 million - IDC EBITDA yield: 12% - Total incremental IDC EBITDA: Rmb3 billion [4]. 4. Recognition Timeline: - Incremental IDC EBITDA will be fully recognized in an average of 2 years due to project delivery and utilization ramp-up time [4]. Risks and Opportunities 1. Downside Risks: - Weaker-than-expected demand for AI training. - Potential faults at data centers damaging reputation. - Higher-than-expected interest rates. - Less favorable regulatory environment [9]. 2. Upside Risks: - Stronger-than-expected growth in AI and cloud business. - Lower-than-expected electricity costs. - Lower-than-expected interest rates. - Tighter control on license granting and Power Usage Effectiveness (PUE) requirements [9]. Additional Insights - The report emphasizes the complexity of converting hyperscalers' capex into IDC orders and EBITDA due to various assumptions involved [2]. - The analysis is based on estimates from UBS and highlights the potential for growth in the IDC sector driven by AI and cloud computing demands [2][9]. Conclusion - The Chinese IDC sector presents significant investment opportunities, particularly in relation to hyperscalers' capital expenditures, but also carries inherent risks that investors should consider.