Morgan Stanley says Nvidia’s GPU cooling needs are a $4.8 billion opportunity, names stocks to benefit
The cooling required for Nvidia’s GPU server rack systems in data centers is set to create a $4.8 billion market by 2027, according to Morgan Stanley Liquid cooling systems are the solution to “power shortage pressures” in data centers, the bank said in a July 30 report. “We believe liquid cooling solution for NVDA’s GB200 server rack system in data centers can create a US$4.8bn [total addressable market] by 2027,” it said. By enhancing thermal design power and more, such liquid cooling systems save between 10% and 15% on capital expenditure, according to Morgan Stanley. The overall cost of a liquid cooling system is $82,460 per rack for Nvidia’s GB200 GPU server — putting it at 15 to 20 times higher than an air-cooling system for its H100 GPU rack. Nvidia’s GPUs dominate the market, and underpin most generative artificial intelligence tools. “Heat flow knowhow, precision requirements and time-to-market delivery are key winning factors in this space,” said Morgan Stanley analysts. Stock picks Companies that stand to benefit include suppliers with “proven shipment record,” among other factors, they added. Names include data center facility vendors Vertiv , Schneider Electric , Taiwanese firm AVC and electronics manufacturing company Delta Electronics . Among those names, Delta is Morgan Stanley’s top pick. It said it likes Taiwanese firm Delta as it believes its liquid cooling solution will add an additional $280 million in AI cooling revenue in 2025. “We like its integrated solution for both power and cooling offerings for data centers. We think it offers the most effective design to hyperscalers and data center operators, as it aims to lower the total cost of ownership while meeting PUE requirements,” the bank’s analysts wrote. PUE is an efficiency metric for power consumption in data centers. Morgan Stanley raised its price target for the stock from 400 to 488 New Taiwan dollars ($12.20 to $14.90), which represents potential upside of around 26%. The bank is also positive on AVC, which it says is “well positioned” to offer various air and liquid cooling products to AI servers. It noted that AVC has been selected as a major GB200 cold plate partner of Nvidia, referring to a component that removes heat by using liquid cooling technology. “Our supply chain checks suggest AVC is the reference design for cold plate for NVIDIA’s GB200 server rack liquid cooling system,” it added. Morgan Stanley expects AVC to roll out its first batch of shipments in the third quarter of this year, and take 30% of the supply share for shipments in 2025. It raised its price target for AVC from NT$520 to NT$830 — a whopping 60% increase. That would imply potential upside of around 35%. — CNBC’s Michael Bloom contributed to this report.
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