UBS Group AG's latest in-depth report, released on the 5th, asserts that the global data center equipment market shows "no signs of cooling." According to UBS Evidence Lab's monitoring data, global data center capacity is undergoing rapid expansion, with 25GW currently under construction and operational capacity standing at approximately 105GW. Analyst Andre Kukhnin's team highlighted that, considering the conversion of projects under construction into actual capacity and sustained high capital expenditures by hyperscale cloud providers, the industry is poised for continued strong growth in 2026 after achieving around 25-30% expansion in 2025.

Given robust construction pipelines and historically low vacancy rates, UBS has raised its mid-term growth expectations for the sector, projecting a 20-25% market growth rate in 2026, encompassing power, cooling, and IT equipment. This optimistic outlook directly counters recent market skepticism about an "AI bubble." UBS emphasized that generative AI (GenAI) adoption is growing exponentially, with early-stage monetization already generating $17 billion in annual recurring revenue (ARR). The deepening application of AI technology, coupled with shorter lifecycles for AI servers driving replacement demand, underpins long-term industry growth.

**Revised Growth Forecast: Liquid Cooling Leads the Charge** UBS updated its core assumptions for the global data center equipment market, forecasting 20-25% growth in 2026 following 25-30% expansion in 2025. Growth is expected to stabilize at 15-20% in 2027 and maintain a steady 10-15% annualized rate through 2028–2030. This projection is supported by cross-validated data, including record-low vacancy rates in North America (1.8%), Europe (3.6%), and Asia-Pacific (5.8%). UBS Evidence Lab’s pipeline analysis suggests a 21% compound annual growth rate (CAGR) from 2025–2029 if planned capacity comes online as scheduled.

Cooling solutions, particularly liquid cooling, are standout segments. With rising AI chip power density, UBS anticipates the cooling market to sustain a ~20% CAGR through 2030, with liquid cooling growing at 45%—the fastest among sub-sectors.

**Sustained Capex Intensity and Rising Value per Megawatt** Addressing concerns about capital expenditure (Capex) sustainability, UBS noted structural cost shifts in AI data center builds. AI facilities cost ~20% more per megawatt than traditional setups, driven by cooling and power infrastructure upgrades. IT equipment costs have surged disproportionately—3–4x higher per megawatt due to expensive AI chips—reducing client price sensitivity and benefiting upstream suppliers.

Despite hyperscalers’ Capex/Sales ratio doubling to 25-30% since 2023, UBS observed that Capex remains manageable at ~75% of operating cash flow (OCF). The tech hardware team expects this high investment level to persist at least through 2027.

**Early AI Monetization Offsets Bubble Risks** UBS provided encouraging evidence on ROI and monetization, estimating $17 billion ARR from core AI-native applications (~6-7% of the current SaaS market). GenAI adoption is unprecedented, with McKinsey data showing enterprises averaging 3.6% revenue growth and 5% cost savings from AI over the past year.

However, UBS flagged physical constraints, particularly power supply bottlenecks—European grid connection waitlists now extend to the 2030s. Data centers are projected to account for over 60% of U.S. power demand growth from 2025–2030, straining grid reliability and equipment delivery. Yet, UBS views these challenges as value drivers rather than cycle-enders.

**Winners and Losers in Tech Evolution** As rack power density jumps from 10kW to 100kW+, infrastructure architecture is transforming. UBS highlighted the shift toward 800V DC systems, expected to dominate by late 2028/early 2029. This transition favors vendors with medium-voltage (MV) product lines and innovation capabilities, while low-voltage (LV) AC equipment faces obsolescence risks.