Key Takeaways:
- BOCOM International rated GDS-SW and SUNEVISION as top Buy picks in data centers
- Generative AI has triggered explosive demand growth, the broker said
- Supply constraints from power quotas and chip shortages limit near-term capacity
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BOCOM International names 2 data center stocks as top AI buys
BOCOM International named GDS-SW (09698.HK) and SUNEVISION (01686.HK) as top Buy-rated picks in the data center sector, citing generative AI-driven demand.
"Generative AI has triggered explosive growth on the demand side, while supply is constrained by power quotas, approval thresholds and delivery cycles of key equipment, compounded by chip constraints," BOCOM International said in a research report published June 17.
The broker maintained a leading rating on the data center sector, stating that the industry is entering a phase of orderly explosive growth. Inference computing's share is rising rapidly and is expected to become the primary driver of future computing power demand, the report said. For operators, demand for high-density and low-latency computing power will become the main growth engine. In upstream equipment, the broker recommends focusing on growth from large-scale adoption of liquid cooling technology, as well as incremental opportunities for green energy and compliance service providers.
The supply-demand gap is unlikely to close in the short term, and the probability of systemic oversupply is low, the broker said. However, it cautioned that investors should remain mindful of potential phased mismatches and valuation volatility over a longer cycle. Leading operators capable of providing immediate supply supplementation can increase market share. GDS-SW rose 2.3 percent and SUNEVISION gained 1.2 percent on the day of the report.
GDS-SW operates data centers across mainland China and has been expanding into Southeast Asia. SUNEVISION, a subsidiary of Sun Hung Kai Properties, focuses on high-tier data center development in Hong Kong and China. Both companies are positioned to benefit from the surge in AI-related computing demand, the report said.
The report aligns with broader bullish sentiment on Chinese data center infrastructure. Citi separately noted that China's 2 trillion yuan AI buildout provides a major boost to domestic infrastructure companies, including Lenovo Group (00992.HK) and ZTE (00763.HK).
The endorsement from a major sell-side firm strengthens the investment case for Chinese data center operators as the country pursues a broader AI infrastructure buildout. Investors will watch for capacity expansion announcements from both companies as demand for high-density computing accelerates.
This article is for informational purposes only and does not constitute investment advice.
