With surging demand, AIDC is expected to generate a huge market worth 168.67 billion yuan.

With the rapid development of AI and the exponential growth of machine learning workloads, power supply and distribution systems are undergoing fundamental changes, creating significant investment opportunities across the supply chain.

UBS Securities projects the potential market size for AI data center (AIDC) power systems to reach $24 billion (approximately RMB 168.67 billion) by 2028, with high-voltage direct current (HVDC) power supplies expected to see a substantial increase in market share.

UBS Securities estimates that investment by North American hyperscale cloud vendors will exceed $388.8 billion in 2025 and further rise to $458.1 billion in 2026; capital expenditures by Chinese hyperscale cloud vendors are also projected to increase to $31.9 billion and $32.8 billion, respectively.

UBS Evidence Lab database forecasts that the CAGR for global and Chinese data center capacity is expected to reach 8% and 27% respectively from 2024 to 2030, primarily driven by the high growth of AI computing.

According to Yan Yishu, a China Utilities and New Energy analyst at UBS Securities, during the upward cycle of AI technology and infrastructure investment, power supply and distribution systems, which account for 10-15% of total AIDC capital expenditure, are expected to benefit. The potential market size may reach $24 billion by 2028, with a CAGR of 25% from 2025-2028. The potential market size ranking for each product is as follows: Server power supplies ($9.7 billion) > UPS + HVDC ($8.4 billion) > Diesel generators ($5.6 billion) > Battery backup units ($400 million).

How will AIDC transform power systems?

Key Trends: High Voltage/High Power/DC

Currently, the GB200 NVL72 rack capacity has reached 120-130kW, while traditional servers are only 12-13kW. The Rubin Ultra series rack capacity, to be launched in 2027, will further increase by more than five times, exceeding 600kW.

As leading hyperscale cloud providers expand their AI server capacity, we believe AIDC power systems will also upgrade towards higher voltage, higher power density, DC power, and modular architecture to meet evolving needs.

Backup power is crucial for AIDCs. To cope with power outages and fluctuations, data centers typically employ different power backup solutions, most commonly UPS and diesel/gas generators.

When a power outage occurs, UPS can respond quickly within 1-10 milliseconds, while diesel/gas generators respond in over 30 seconds. However, a drawback of UPS is the short battery life. Diesel/gas generators, on the other hand, can provide power for extended periods by continuously replenishing diesel/gas.

HVDC is taking market share from UPS. We believe that compared to low-voltage UPS, ±400V or 800V HVDC offers improvements in efficiency, flexibility, and scalability, and may become the dominant technology in the coming years.

HVDC converts AC power to high-voltage DC power to supply data centers; UPS first converts AC power to DC power and then back to AC power to supply data centers. Due to fewer conversions, HVDC has lower energy loss than UPS.

HVDC's high-voltage DC characteristics result in lower current than UPS AC, eliminating unnecessary harmonic distortion and thus reducing copper usage (by over 45%), heat, and power loss compared to UPS.

HVDC eliminates the need for rectifiers and requires thinner copper cabling, saving data centers land and material costs.

HVDC employs a simple, modular topology, making it easier to switch to backup power during power outages and improving power system reliability. The complex parallel structure of UPS can increase the risk of system failure.

The construction of HVDC projects and the production of advanced HVDC chips in China have been hampered by US export controls on China (such as high-performance AI/control chips and EUV/DUV lithography equipment). Overseas hyperscale cloud vendors are accelerating their shift to higher power density racks, and HVDC is currently gaining strong momentum in overseas markets. However, with the localization of chip production and policy support, we expect the adoption rate of HVDC in China to increase in the medium to long term. The global market share of HVDC may expand from 10% in 2024 to 40% in 2028, seizing market share from UPS.

According to UBS's data center power demand forecast, the global market size for UPS and HVDC is expected to reach $8.4 billion in 2028, with HVDC accounting for $4.5 billion; in China, the figures may be $900 million and $400 million respectively.

Chinese suppliers are expected to expand their market share.

Currently, the AIDC power system market is dominated by traditional overseas companies. We believe that against the backdrop of increased capital expenditure, Chinese suppliers, with their continuous technological breakthroughs and cost advantages, are expected to expand their share in the overseas supply chain. Chinese suppliers cooperating with overseas hyperscale cloud vendors will also benefit from higher overseas profit margins.

Meanwhile, we believe that new entrants with strong technological capabilities and product advantages are also poised to penetrate this market. Wind power and Energy Storage inverters share similar technologies with HVDC. At a time when the industry is transitioning from 48V to ±400V or 800V, HVDC offers new entrants an opportunity to disrupt the market.