Some investors' perspective: Seeking AI investment opportunities solely in electronics and machinery sectors. As AI sector momentum continued last week, the market predominantly sought AI-related hardware investment opportunities in electronics, machinery, and automotive sectors, while upstream non-ferrous metals applications in AI remain undervalued.
Our contrarian view: Emphasizing accelerated applications of non-ferrous new materials in AI hardware. With increasing computational density, heat dissipation issues in computing equipment become prominent. Liquid cooling technology, as a core solution, is expected to see significant market demand growth. Copper offers exceptional thermal conductivity, while aluminum liquid cooling plates provide both excellent thermal conductivity and lightweight properties suitable for data center applications. For AI servers, computing chips are evolving toward high-power, high-current iterations. Metal soft magnetic chip inductors meet these requirements while offering high efficiency and miniaturization advantages, presenting broad application prospects.
Liquid cooling plates: Wind cooling system heat dissipation limits have been exceeded, creating new demand for copper and aluminum. Taking NVIDIA's DGX B200 as an example, the 10U chassis equipped with 8 GPUs has maximum power consumption reaching 14.3kW, requiring each rack unit to achieve 1,430W heat dissipation, exceeding single-chip air cooling limits. Next-generation AI computing cards GB300 will adopt full liquid cooling solutions. Copper and aluminum are primary heat transfer materials for liquid cooling plates. For copper, high-precision custom oxygen-free copper bar products, leveraging high thermal conductivity and excellent welding and processing performance, have achieved large-scale production in 3DVC new AI heat dissipation structures. Multiple first-tier global thermal module companies and several top-tier GPU cooling solutions have adopted these products. For aluminum, as a segment within aluminum plate and strip products, aluminum heat transfer materials offer lower density than copper, helping reduce overall server weight. Lower production costs also facilitate large-scale server deployment. Aluminum materials are widely used in liquid cooling systems including heat sinks, cold plates, cabinet frames, and cooling pipelines. For single-phase immersion liquid cooling tanks, average aluminum consumption per cabinet can reach 90kg.
Metal soft magnetic materials: AI computing power explosion catalyzes chip inductor market, edge device demand expands application opportunities. Exponential growth in AI computing demand places dual requirements on chip inductors, core components of server chip power supplies, for performance enhancement and mass supply capability. From a performance perspective, compared to ferrite soft magnetics, metal soft magnetics offer higher saturation magnetic flux density and better temperature and frequency stability. Under conditions of higher current and power tolerance, metal soft magnetic chip inductor volume can decrease by approximately 70%, better meeting GPU chip power supply requirements for high efficiency and miniaturization. From market space perspective, according to Trendforce data, global AI server shipments reached 1.75 million units in 2024, up 46% year-over-year, with projected 24.3% growth to 2.18 million units in 2025. We believe AI server shipments will maintain high growth rates medium-term driven by computing power enhancement demand, creating broad market space for high-performance metal soft magnetic chip inductors. Additionally, as AI industry accelerates iteration, edge device demand from computing power distribution including AI PCs and AI smartphones is expected to become an application blue ocean for chip inductors, further expanding application space for metal soft magnetic materials.
Investment Recommendations and Investment Targets
Heat transfer materials: For aluminum, we recommend focusing on Huafeng Aluminum (601702, Buy), which has a stable competitive landscape and potential medium to long-term liquid cooling demand. The company faced short-term performance impact last year due to aluminum industry export tax rebate cancellation, but industry competitive dynamics remain stable. Major aluminum heat transfer industry trends include aluminum substitution for copper in air conditioning, energy storage data center liquid cooling, and ship-type liquid cooling plates. Energy storage liquid cooling and ship-type liquid cooling plates may gradually scale up, potentially positively impacting future processing fee improvements. The Chongqing Phase II factory added hot rolling capacity, potentially addressing the company's hot rolling process gaps. After 2027 production commencement, scale advantages may continue expanding with gradual gross margin recovery. For copper, we recommend attention to Jintian Co. (601609, Unrated).
Metal soft magnetic materials sector: We recommend focusing on Pukang New Materials (300811, Buy), which features proprietary high-pressure molding and copper-iron co-firing processes and launched integrated molded chip inductor products. Integrated molded chip inductors using metal soft magnetic powder cores offer high efficiency, small volume, and high power characteristics, effectively addressing new AI server GPU chip power supply requirements. Chip inductors have become a new growth curve for the company. The company is currently expanding integrated molded chip inductor product capacity, with project completion expected to increase inductor capacity by 20 billion pieces annually, further enhancing chip inductor product innovation capabilities and consolidating the company's leading position in metal soft magnetic materials industry.
Risk Factors
Domestic macroeconomic growth deceleration; tariff and other factors affecting export demand and supply chain stability; raw material price volatility.