According to Zhito Finance APP, Soochow Securities released a Research Report stating that the explosion of AI computing power brings about an increase in Generator demand, and the gas turbine Generator Industry Chain is expected to benefit significantly. Currently, the USA is the largest AI computing power market globally, with enormous future development potential. However, due to the imperfect infrastructure of the USA's electrical grid, gas turbines are generally the main power supply equipment for Datacenters. There is a bullish outlook for suppliers in China within the supply chain regarding potential benefits. At the same time, the domestic diesel engine/gas turbine market is still primarily dominated by overseas leaders, but the production capacity of foreign enterprises is limited. There is a bullish outlook for the breakthrough opportunities presented by the growth in domestic computing power demand leading to domestic substitutes.

The main viewpoints of soochow securities are as follows:

The explosion of AI computing power brings about an increase in Generator demand, and the gas turbine Generator Industry Chain is expected to benefit significantly.

The demand for AI computing power drives an increase in Generator demand. According to Gartner's predictions, by 2027, the electricity demand for running AI-optimized Servers is expected to reach 500 terawatt-hours per year, which is 2.6 times the level of 2023. Datacenter power supply methods include grid power, diesel Generator, gas turbine Generator, Nuclear Power, geothermal, Wind Power, and other methods. However, the construction cycles for geothermal, Nuclear Power, and Wind Power are relatively long, and since the global electrical grid infrastructure is not well-developed, gas + RBOB Gasoline is the better option for resolving electricity shortages in the short term.

However, diesel Generator power generation causes pollution issues, hence the clean + efficient + low-cost gas turbine Generator has become the best choice for supplying power to AI computing centers outside of China. For example, Musk chose to use gas turbines to power Datacenters due to electrical grid issues, and Datacenters in Ireland also chose to directly use gas turbine power, driving the expansion of the entire Industry Chain market scale.

USA Market: Gas turbines are the main power supply, with a bullish outlook for suppliers in China within the Industry Chain regarding potential benefits.

The USA is the largest AI computing power market globally, with enormous future potential, and due to the insufficient infrastructure of the USA electrical utilities, gas turbines generally serve as the primary power supply for datacenters. The industry is bullish on the potential benefits for Chinese equipment manufacturers within the supply chain.

① Yantai Jereh Oilfield Services Group (integrator, buys gas turbines for generator set integration): The company can supply gas turbine generator sets for the oil service industry's electric hydraulic fracturing equipment in the North American market, possessing industry chain experience. The company is actively expanding into the datacenter field, with Carter's subsidiary Solar as its core competitor.

② Anhui Yingliu Electromechanical: The company can produce gas turbine moving blades, tying itself to global gas turbine leaders GE and Siemens, providing substantial flexibility as a parts supplier.

③ Linde's public company: The company is a cast supplier for Caterpillar's gas turbines and diesel engines and will directly benefit from this.

China market: Diesel engines/gas turbines serve as backup power sources, and there are bullish prospects for domestic replacement opportunities due to the growth in computing power demand.

Unlike the USA market, China has a well-established electrical utilities infrastructure. The power supply for domestic datacenters can be solved by the grid, requiring only diesel engines/gas turbines as backup power. Currently, the domestic diesel engines/gas turbines are still dominated by overseas leaders, but with limited production capacity from foreign enterprises, there are bullish breakthrough opportunities for domestic replacements driven by the increasing demand for computing power. It is recommended to pay attention to Weichai Heavy Machinery and China Yuchai International, among others.

Investment recommendation:

It is recommended to achieve sales of gas turbine generator sets compatible with electric hydraulic fracturing equipment in the North American market and to sign exclusive agreements with leading gas turbine manufacturers through Yantai Jereh Oilfield Services Group (002353.SZ); it is also advised to focus on overseas gas turbine leading component suppliers Anhui Yingliu Electromechanical and Linde's public company (605060.SH), as well as domestic diesel engine replacement suppliers Weichai Heavy Machinery (000880.SZ).

Risk Warning: Datacenter capital expenditures are below expectations; demand for Gas Turbine Generators is lower than expected; international trade disputes.