Record demand for AI data centre infrastructure is filling order books for power and cooling companies. However, investors are becoming cautious as grid connection bottlenecks delay projects and high share valuations come under pressure.
As the global AI boom drives a rush to build data centres, the spotlight is shifting from chipmakers to the companies providing the essential plumbing. The infrastructure required to power and cool these high-energy facilities is seeing unprecedented demand. While developers are racing to build data centres within months, the physical components like transformers and liquid cooling systems have become a bottleneck in the supply chain.
The Transformer Supply Challenge
Transformers are currently the most critical pressure point. In South Korea, HD Hyundai Electric recently reported an order backlog of $8.49 billion for the second quarter of 2026, marking a 29.6% increase compared to the previous year. Similarly, China-based Hainan Jinpan Smart Technology saw its data centre-related orders quadruple in the first half of the year. Both companies are moving toward solid-state transformers, which use semiconductors to improve energy efficiency by about 4% compared to older, copper-winding models.
Liquid Cooling Becomes Mandatory
As AI processing chips generate massive amounts of heat, the industry is moving away from traditional air-based cooling. Experts expect liquid cooling to become the standard for 70% of new data centre installations by 2030, a sharp rise from the current 30%. This shift is providing a steady flow of business for specialized providers such as Delta Electronics, Asia Vital Components, Auras Technology, and Shenzhen Envicool Technology, all of which form a critical part of the supply ecosystem for advanced computing hardware.
Investor Caution and Operational Risks
Despite the strong revenue growth, the stock market reaction has become more selective. After significant price rallies in 2025, investors are now questioning if valuations have run ahead of fundamentals. The primary concern is not a lack of demand, but the speed of execution. In many major developed markets, obtaining a grid connection for a new data centre can take up to eight years. These systemic delays mean that even with a strong order backlog, companies may face a longer time to convert these orders into actual revenue.
Furthermore, leadership teams at these firms have indicated that they expect profit margins to remain steady rather than expand significantly. Rising supply chain costs and intense competition are limiting the ability of these companies to increase prices. For investors, the era of assuming growth for every infrastructure supplier appears to be over. The focus is shifting toward companies with long-standing client relationships and the ability to navigate complex project timelines without suffering from cost overruns. The key monitorable in the coming quarters will be how efficiently these firms can clear their order backlogs against the backdrop of persistent grid connection hurdles.