Orient Securities has released a research report indicating that the ramp-up in shipments of Nvidia's VR platform and Google's TPU v7/v8 will serve as the primary catalyst for liquid cooling demand, potentially driving the global liquid cooling supply chain from small-batch deliveries toward large-scale mass production. The firm notes that revenue growth and forward guidance from Taiwanese liquid cooling manufacturers further validate the certainty of overseas demand expansion in the second half of the year. Starting in the third quarter, data center liquid cooling demand is expected to accelerate, with domestic supply chain companies likely to progressively enter phases of order confirmations and volume production ramp-ups in H2.
The report outlines that, according to media reports, Microsoft and OpenAI announced in August the completion of deliveries for the first batch of Nvidia Vera Rubin NVL72 racks, marking the official entry of Nvidia's VR platform into its production ramp-up phase. Meanwhile, Google confirmed during its second-quarter earnings call that TPU shipments to data center customers have begun, with TPU v8 expected to enter formal mass production in H2. The brokerage believes that the shipment ramp-ups of Nvidia VR and Google TPU v7/v8 from Q3 onward will be the key driver for liquid cooling demand, pushing the global supply chain from small-batch to large-scale production.
Taiwan-based manufacturers have provided clear guidance, reinforcing the likelihood of significant liquid cooling volume growth in H2. AVC's July revenue reached a record NT$18.59 billion, up 57% year-over-year and 6% sequentially, with the company stating that liquid cooling products for Nvidia's VR series are expected to contribute revenue starting in Q3 and ASIC liquid cooling products are slated for volume ramp-up in Q4. AVC also projects that data center liquid cooling penetration could exceed 50% by 2027. Similarly, Auras Technology posted record July revenue of NT$3.765 billion, surging 117% year-over-year and 39% sequentially, citing increased demand for Nvidia's GB series in Q3 and the start of ASIC liquid cooling mass production as joint drivers of shipment growth. The strong monthly results and explicit production guidance for Nvidia/ASIC liquid cooling products in H2 from Taiwanese vendors further corroborate the expected demand surge overseas.
The report anticipates that, beginning in Q3, domestic liquid cooling supply chain firms will progressively see order inflows or earnings deliveries. Envicool disclosed in its interim report that Q2 revenue reached RMB 1.841 billion, up 12% year-over-year and 57% sequentially, with net profit attributable to shareholders at RMB 176 million, rising 5% year-over-year and a dramatic 1,934% sequentially. According to company announcements, Envicool has become a data center liquid cooling partner for overseas tech giants including Nvidia, Google, and Intel. Additionally, Feilong Auto Components reported in its interim results that terminal orders for liquid cooling pumps on platforms below 10kW surpassed 50,000 units in H1, while orders for pumps on platforms above 10kW approached 10,000 units, with nearly 20 liquid cooling pump projects already in small-batch delivery. The brokerage argues that select domestic liquid cooling companies, such as Envicool and Feilong Auto Components, have gained recognition and secured orders from overseas clients. As Nvidia and Google ramp up production of next-generation chips, domestic liquid cooling supply chain firms are expected to experience marginal order improvements or earnings realizations starting in Q3.
Risks include slower-than-expected overseas data center expansion, lower-than-anticipated liquid cooling penetration rates, delays in domestic suppliers' overseas market entry, and intensifying market competition.