AI server liquid-cooling supply chain: UBS sees rising AI-server liquid-cooling content outweighing cold-plate price pressure

Overview

This post-CES industry note addresses investor concerns about NVIDIA's liquid-cooling roadmap, rack-level cooling architecture, and the timing of microchannel-lid adoption. UBS maintains a constructive view of the liquid-cooling supply chain, favoring AVC and Jentech while seeing Q4 upside for Auras.

Core views

UBS says NVIDIA reaffirmed that its in-rack cooling architecture is progressing from the hybrid liquid-cooled Blackwell design to a 100% liquid-cooled Rubin design. The shift encompasses GPUs, CPUs, switch ASICs, NICs, DPUs and CPXs. UBS expects this to raise the number of cold plates per GPU rack, consistent with its content analysis. Although simplified rack assembly raised investor concerns about commoditization and pricing pressure, UBS already factors in an approximately 50% cold-plate ASP cut for VR. It believes the larger cold-plate count per rack more than offsets that pressure, with additional upside from more complex gold-plated designs used to bond to indium TIM 2 and from more ASIC volumes moving to liquid cooling in 2026. On cooling-system configuration, UBS distinguishes rack-level liquid-to-air cooling from facility-level liquid-to-liquid cooling. Its checks indicate a 30°C inlet/45°C outlet split, with coolant passing through cold plates and then a liquid-to-air sidecar, where Delta has leading market share. UBS argues that chillers are not required at the rack level because the L2A sidecar uses fans to exchange heat; facility-level chillers remain necessary for general operations in liquid-to-liquid systems. This distinction addresses concerns that NVIDIA's comments on not needing rack cooling chillers could weaken demand for Delta's L2A sidecars. For microchannel lids, UBS says investor expectations range from adoption only with Rubin Ultra in H2 2027 to Feynman in H2 2028. Its supply-chain checks instead point to healthy testing progress and possible use in an overclocked VR200 SKU with 2,300 SKU TDP by year-end 2026 or early 2027, followed by broader adoption in VR300 Kyber. UBS's rationale is not simply higher TDP: larger, denser GPU packages increase warpage, requiring a thicker TIM 2 layer and materially raising thermal resistance. Removing TIM 2 and adopting MCL could therefore become necessary. UBS prefers AVC and Jentech. AVC's December sales of NT$13.9bn, down 20% month on month, were attributed to customer order-schedule shifts; implied Q4 2025 sales of NT$47.9bn were up 23% quarter on quarter and 3% above UBS estimates and 1% above Street expectations. UBS sees AVC retaining cold-plate leadership, expanding ASIC exposure across Tier 1 CSPs, and serving as reference designer for a key AI-native customer's ASIC. It also believes expectations understate AVC's TPU opportunity because they omit additional VRM cold-plate content beneath the TPU compute board. Jentech's December and Q4 2025 sales were NT$1.87bn, up 10% month on month, and NT$5.27bn, up 4% quarter on quarter, respectively—2% below UBS estimates and 6% below Street expectations. UBS nevertheless describes Jentech as the MCL leader and notes its qualification for VR200 microchannel cold plates. Auras reported December sales of NT$2.8bn, up 16% month on month, implying Q4 2025 sales of NT$7.6bn and 28% quarter-on-quarter growth, versus guidance and UBS estimates of 25% and 17% growth. UBS attributes the outperformance to a stronger cold-plate production ramp in Thailand and expects Q1 2026 sales to remain flat quarter on quarter from the higher base.

Analysis framework

UBS combines NVIDIA CES commentary with supply-chain checks, rack-level cold-plate content analysis, thermal-system engineering logic, and reported monthly sales versus UBS, Street, and company guidance. It evaluates how design changes affect unit content, pricing, volumes, and supplier positioning.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Rack-level liquid-cooling content and supply-chain transmission analysis

  UBS traces NVIDIA platform design changes through cold-plate content per rack, cooling-system configuration, component demand, and the positioning of Taiwanese thermal suppliers.

• Valuation methodsP/E and PEG Valuation

  PE multiple valuation

  The report states that AVC, Auras, and Jentech are valued using PE multiples.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asia Vital Components (3017.TW)

  Covered cold-plate supplier expected to benefit from liquid-cooling content growth and ASIC exposure.

  Strengths

  Cold-plate leadership, ASIC exposure across Tier 1 CSPs, reference-design role for a key AI-native ASIC, and potentially underestimated TPU and VRM cold-plate content.

  Weaknesses

  December sales declined 20% month on month, which UBS attributes to customer order-schedule shifts.

  Comparison

  Implied Q4 2025 sales were 3% above UBS estimates and 1% above Street expectations.

  Risks

  Liquid-cooling adoption could lag, cold plates could be commoditized, raw-material costs could rise, and hyperscaler server demand could fluctuate.

• Jentech Precision Industrial (3653.TW)

  Covered supplier positioned as the MCL leader and qualifying VR200 microchannel cold plates.

  Strengths

  MCL leadership and ongoing VR200 MCCP qualification.

  Weaknesses

  Q4 2025 sales were below both UBS and Street expectations.

  Comparison

  Q4 2025 sales were 2% below UBS estimates and 6% below Street expectations.

  Risks

  MCL manufacturing complexity and yields, lidless packaging, competition and capacity expansion, slower server upgrades, copper costs, FX headwinds, and semiconductor lead-frame cyclicality.

• Auras Technology (3324.TWO)

  Covered cold-plate supplier benefiting from a stronger Thailand production ramp.

  Strengths

  December sales rose 16% month on month and implied Q4 2025 sales exceeded guidance and UBS estimates.

  Weaknesses

  UBS expects Q1 2026 sales to be flat quarter on quarter from a higher base.

  Comparison

  Implied Q4 2025 sales growth of 28% QoQ exceeded guidance of 25% and UBS estimates of 17%.

  Risks

  Liquid-cooling adoption, thermal-module pricing pressure, raw-material volatility, and AI/general-server demand variability.

• Delta

  Leader in liquid-to-air sidecars used in UBS's described rack-level cooling configuration.

  Strengths

  UBS identifies Delta as having leading market share in L2A sidecars.

  Comparison

  UBS distinguishes Delta's rack-level L2A equipment from facility-level L2L systems, where chillers are used.

  Risks

  Changes in end-market demand and competition could affect UBS forecasts for Delta.

Key data

• Assumed VR cold-plate ASP change~50% cutFactored by UBS for simplified rack assembly; UBS expects higher cold-plate count per GPU rack to offset it.
• Potential MCL timingYear-end 2026 or early 2027Potential overclocked VR200 SKU with 2,300 SKU TDP; broader adoption is expected for VR300 Kyber.
• AVC implied Q4 2025 salesNT$47.9bn (+23% QoQ)3% above UBS estimates and 1% above Street expectations.
• Jentech Q4 2025 salesNT$5.27bn (+4% QoQ)2% below UBS estimates and 6% below Street expectations.
• Auras implied Q4 2025 salesNT$7.6bn (+28% QoQ)Versus guidance and UBS estimates of +25% and +17% QoQ.
• NVIDIA flagship cold-plate TAMUS$5mn in 2024, US$737mn in 2025E, US$1,850mn in 2026EUBS bottom-up cold-plate analysis.

Impact & implications

UBS believes fully liquid-cooled NVIDIA racks can expand cooling content and support cold-plate suppliers despite potential ASP compression. Earlier MCL adoption would particularly support Jentech's positioning, while AVC benefits from broad ASIC exposure and Auras from its Thailand production ramp.

Risks

• Liquid-cooling adoption in AI servers could be slower than expected, limiting core-business growth.
• Thermal-module standardization or commoditization could intensify cold-plate price competition.
• Copper and aluminum cost volatility could pressure margins.
• AI and general-server demand from key US hyperscalers could fluctuate.
• MCL adoption could be delayed by manufacturing complexity and yield challenges, while lidless packaging could become a competing technology.
• Slower server replacement cycles, semiconductor lead-frame cyclicality, FX headwinds, and rival capacity expansion could weigh on suppliers.

What to watch

• NVIDIA's transition from hybrid cooling to 100% liquid-cooled Rubin racks and the resulting cold-plate content per rack.
• Whether ASP pressure from simpler rack assembly is offset by higher component content and more complex cold-plate designs.
• MCL testing progress and potential introduction in an overclocked VR200 SKU by year-end 2026 or early 2027.
• ASIC migration to liquid cooling during 2026.
• AVC's ASIC and TPU cold-plate content, Jentech's VR200 MCCP qualification, and Auras' Thailand production ramp and Q1 2026 sales trend.