TSUGAMI CHINA (ASX: 01651) shares experienced a significant surge of over 17% in morning trading. As of the latest update, the stock was up 16.3%, trading at HK$61 with a turnover of HK$64.0922 million.

Catalyst for the movement

Market attention has been drawn to Nvidia's new Vera Rubin rack-scale system. As power density per cabinet continues to rise, liquid cooling is rapidly transitioning from an optional feature to a necessary component for AI servers. Analysts at Shenwan Hongyuan have highlighted that AI computing infrastructure development is driving a sharp increase in demand for liquid-cooled servers. This demand is boosting the need for precision structural components like cold plates, UQD quick connectors, and water distribution units, which in turn stimulates demand for machine tools such as drilling and tapping machines, vertical machining centers, Swiss-type lathes, and turn-mill centers. The upstream components of the liquid cooling supply chain are noted for their high gross margin characteristics.

Company's market position

The firm's core product portfolio includes Swiss-type lathes (automatic lathes), turret lathes, machining centers, and grinders, which are utilized in downstream sectors like automotive and 3C electronics. As a crucial production tool for manufacturing liquid cooling connectors, orders for Tsugami's Swiss-type lathes are expected to benefit substantially from the surge in liquid cooling demand, contributing significant incremental growth for the company.