Goldman Sachs大幅 Raises Target Price for Delta Electronics to NT$4,500, Optimistic About AI Power Growth

Overview

The core view of this Goldman Sachs research report is that, based on a more positive outlook for the AI server power product line, it has significantly raised Delta Electronics' earnings forecast and target price. The report argues that the pricing per watt for new AI power products—especially the 12kW model—is accelerating, while demand and contribution timing for high-voltage DC (HVDC) power racks are also coming sooner than previously expected, which will drive significant improvements in the company's revenue and profitability over the next few years. Therefore, the report reaffirms a buy rating and significantly raises the 12-month target price from NT$2,420 to NT$4,500.

Core views

The report's core judgment is built on the expectation that the AI power product line will drive rapid growth in the company's performance. First, at the product level, there is an ongoing upgrade from 5.5kW to 12kW and higher-power power supply units (PSUs). A key finding is that the bill-of-materials (BOM) cost per watt for 12kW PSUs is 43% higher than for 5.5kW models, mainly driven by increased usage and rising prices of power semiconductors and capacitors. Goldman Sachs believes that, given a stable competitive landscape and the company's continued leadership in market share (projected to exceed 70% in 2026), this cost increase will be smoothly passed through to average selling prices (ASP), resulting in a similar magnitude of growth in ASP per watt. Second, the high-voltage DC (HVDC) power rack, as a next-generation architecture, will contribute earlier and faster than expected. The report notes that several major cloud service providers are actively adopting HVDC, and large-scale shipments are expected to begin in the first half of 2027, driven by NVIDIA’s Kyber rack architecture. This architecture not only provides 100% power redundancy (better than the current 40-60%), but also adds incremental components such as DC/DC converters—areas where Delta excels. Based on these two points, the report significantly raised its financial forecasts. It projects that the company’s overall AI power revenue (including AC/DC PSUs, DC/DC converters, and power racks) will grow at a compound annual growth rate (CAGR) of 210% from 2025 to 2028, far exceeding the market’s overall growth rate of 183%. The contribution of AI products to total revenue will jump from 9% in 2025 to 66% in 2028. Accordingly, gross margin will rise from 34% in 2025 to 45% in 2028. Analysts have raised their earnings per share (EPS) forecasts for 2026/27/28 by 1%, 5%, and 24%, respectively.

Analysis framework

The institution’s analytical approach focuses primarily on three dimensions: product technology evolution, cost structure, and market demand. First, through detailed BOM cost analysis, it quantifies the cost growth structure from 5.5kW to 12kW PSUs and infers its ability to pass through to ASP, based on the company’s market leadership and stable pricing power. Second, combined with surveys of the supply chain (power semiconductors, capacitors), it judges that key component prices still have upward trends, further supporting the optimistic outlook for future product pricing and gross margins. Finally, by tracking downstream customers’ product roadmaps (such as NVIDIA) and the adoption intentions of major cloud service providers, it assesses the pace and scale of market penetration for the next-generation HVDC power racks and maps these incremental contributions to specific business segments of the company (such as AC/DC PSUs, DC/DC converters, and power racks) for revenue and profit projections.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  An analysis of supply and demand in the AI server power market, with particular focus on matching supply-side cost changes brought about by technological upgrades with downstream customer demand evolution.

  The report builds a framework for forecasting market size and pricing trends over the next few years by analyzing the BOM cost increase from 5.5kW to 12kW PSUs (supply-side change) and combining it with NVIDIA’s next-generation GPU release schedule and cloud service providers’ (CSPs) demand for higher-efficiency solutions (demand-side drivers).

• Company Fundamentals and Financial FrameworkVolume-price decomposition

  A detailed decomposition and projection of Delta Electronics’ AI power business line into volume (revenue scale, market share) and price (average selling price per watt, ASP per watt) factors.

  The report’s core forecasting logic breaks down the growth of total AI power revenue into two driving factors: growth in shipment volume (based on market share and overall TAM forecasts) and increases in unit price (through BOM cost and pricing transmission analysis), leading to a growth rate well above the market average.

• Valuation MethodologyPE/PEG valuation

  Using the price-to-earnings ratio (P/E) as the primary valuation method and referencing the growth rate (PEG logic) to justify the high growth expectations.

  The report values the company based on its 2028 projected earnings per share (EPS)

Asset mapping & comparison

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

• Delta Electronics (2308.TW)

  The report’s core coverage and favored asset, expected to directly benefit from the rapid growth of the AI server power market, product upgrades, and the accelerated penetration of next-generation HVDC power racks.

  Strengths

  Holds an absolute leading market share in the AI power market (projected to exceed 70% in 2026); as the largest customer of global power semiconductor suppliers, it enjoys strong purchasing power and supply chain security advantages; possesses strengths in AC/DC and DC/DC conversion technologies and vertical integration capabilities, enabling it to capture a dominant share in the HVDC power rack market.

  Weaknesses

  The report does not explicitly mention any weaknesses of this asset.

  Comparison

  The report’s 2026/27/28 earnings forecasts are 19%, 50%, and 95% higher than market consensus, respectively, mainly because the report’s expectations for the contribution of high-margin AI businesses are significantly higher than consensus estimates.

  Risks

  Mainly include: 1. Slower-than-expected growth in AI server power consumption; 2. Potential loss of market share or design changes in AI server DC-DC power systems; 3. Delays in the deployment of future products, including power racks, compared to expectations.

Key data

• Target PriceNT$4,500Up by approximately 86% from the previous target price of NT$2,420, implying an upside of about 96% relative to the current stock price.
• AI Power Total Revenue (2025-28E CAGR)210%Far above the market’s expected growth rate of 183%, driven by market share leadership and product structure upgrades.
• 12kW PSU BOM Cost (vs. 5.5kW)+43% per wattMainly due to significantly increased usage and prices of power semiconductors and capacitors, which are expected to be passed through to product pricing.
• AI Product Revenue Contribution RatioFrom 9% (2025) to 66% (2028E)Indicates that the business structure will rapidly shift toward high-growth, high-margin AI power products.
• 2028E Projected ROE87%Extremely high projected return on equity, used to support the rationale behind the valuation multiple being above the historical average.

Impact & implications

The report suggests that Delta Electronics, as a key global supplier of AI server power, will see its long-term earnings growth prospects and industry leadership position further strengthened. The rapidly expanding proportion of high-margin AI-related businesses will not only drive continuous improvement in the company’s overall profitability (gross margin, return on equity), but should also allow its valuation level to move beyond historical ranges and sustain a premium valuation.

Risks

• Slower-than-expected growth in AI server power consumption
• Potential loss of market share or design changes in AI server DC-DC power systems
• Delays in the deployment of future products, including power racks, compared to expectations