AI Infrastructure Value Chain: Data Centers & Power Supply – Investment Analysis Top 4 picks

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AI Infrastructure Value Chain: Data Centers & Power Supply – Investment Analysis

 

Introduction and Investment Thesis

 

NVIDIA CEO Jensen Huang recently highlighted that infrastructure (along with advanced manufacturing and software) is a key strength that could position South Korea as a leader in the “Physical AI” era.
In line with that vision, we turn our focus to the AI-related infrastructure value chain, identifying promising companies that build and support the physical backbone for AI – namely data centers and power supply systems.
This report analyzes four such companies (2 in KOSPI/KOSDAQ, 2 in U.S. markets) with strong investment potential in AI infrastructure, covering their business models, industry outlook, and intrinsic valuation (as of 2Q 2025).

We particularly examine two critical infrastructure segments:

  • Data Centers & Cloud Infrastructure – the facilities and services that house AI computing.

  • Power & Cooling Systems – the electrical and thermal infrastructure enabling reliable, high-density AI operations.

 

Below we present a deep-dive into each segment’s growth drivers, followed by company-specific analyses including investment idea, business model, industry context, recent performance, and a valuation perspective.

Surging Demand for AI Data Centers and Power Infrastructure

 

Global AI Boom Driving Data Center Expansion: The proliferation of generative AI is spurring an unprecedented building spree of data centers worldwide.
Analysts estimate roughly $3 trillion will be invested in new datacenters by 2028 to support AI workloads .
Tech giants (the hyperscalers like Amazon, Google, Meta, Microsoft) alone are expected to spend over $750 billion on AI-related capex (data centers, chips, servers) in just the next two years .
This “nothing short of incredible” wave of investment reflects AI’s immense computational demands – training large AI models requires thousands of GPUs running in parallel, consuming enormous power and generating heat.
Governments and local communities are also embracing these projects as the “infrastructure of the future,” comparable to how steel mills powered the industrial era .

Such growth comes with challenges. There are now 11,000+ data centers globally (5× increase over 20 years), and funding this boom is stretching traditional financing – over $1.5 trillion may need to come from private capital beyond the hyperscalers’ own cash flows .
Some observers warn of potential over-build or a bubble in speculative projects without confirmed customers .
Nevertheless, current demand signals remain robust: generative AI revenues are projected to soar from $45 billion in 2022 to $1 trillion by 2028, providing a strong economic rationale for these infrastructure investments .
In short, the world is racing to construct the digital factories (data centers) for the AI age, and there are few signs of a near-term slowdown in this arms race .

Power Supply as a Bottleneck: A major consequence of the AI data center boom is surging demand for electrical power and cooling.
Modern AI supercomputing racks can draw 10× the power of traditional server racks, straining existing power infrastructure.
Data center operators are now investing in on-site power generation (e.g. dedicated gas turbines, fuel cells) and massive uninterruptible power systems to ensure stable electricity .
This trend is creating a shortage of high-end power equipment – from ultra-high-voltage transformers and switchgears to industrial generators and battery backup systems .
Industry analysts note that AI data centers are increasingly built with redundant power feeds and “hybrid” power architectures (combining grid power with on-site generation and energy storage), which in turn drives demand for a wide range of electrical gear at both the high-voltage and medium-voltage levels .
In short, the AI revolution is not only about chips and algorithms – it is also an infrastructure revolution requiring new physical capacity in power grids, cooling technology, and data facilities.

Against this backdrop, investors can benefit by targeting companies along the AI infrastructure value chain. In the following sections, we analyze four companies well-positioned in this realm: two focused on data center operationsand two on power/cooling equipment.
These picks balance Korean and U.S. markets, reflecting both the local opportunity in Korea’s tech infrastructure and the global scale of U.S. players.

Top Picks in AI Infrastructure Value Chain

 

Selected Segments & Companies:

  • Data Center / Cloud Infrastructure Providers:

    • KINX (KOSDAQ: 093320) – Korea’s leading carrier-neutral internet data center and network exchange operator.

    • Equinix (NASDAQ: EQIX) – The world’s largest colocation data center REIT, enabling global cloud interconnection.

     

  • Power & Cooling Systems Providers:

    • Hyosung Heavy Industries (KRX: 298040) – Korean leader in high-voltage electrical equipment (transformers, switchgear, ESS) with booming orders from AI data centers and grid upgrades.

    • Vertiv Holdings (NYSE: VRT) – U.S. provider of critical power supply and thermal management solutions for data centers, experiencing explosive growth as a “picks-and-shovels” play on AI infrastructure.

     

 

Below we provide a detailed analysis of each company, covering their business models, industry dynamics, recent financial performance, and valuation outlook as of mid-2025.

 

KINX (케이아이엔엑스) – Carrier-Neutral Data Center & Network Hub

 

Investment Highlights:

  • Unique Market Position: KINX is the only carrier-neutral Internet eXchange (IX) operator in Korea, offering co-location (IDC), content delivery (CDN), and cloud connectivity services to enterprises .
    This neutral status (not tied to any single telecom carrier) gives KINX a strategic edge in attracting customers who need flexible, multi-network connectivity.

  • Data Center Expansion: The company is significantly expanding capacity – investing ~₩160 billion to build a new data center in Gwacheon, slated to increase rack capacity by ~1.4× (adding ~2,000–2,500 racks to the current ~1,800) .
    Early customer sign-ups for the new facility are strong, expected to exceed the initial occupancy target of 30% by opening . This expansion sets the stage for a step-change in revenue from late 2024 onward.

  • Rising Data Traffic from AI/VR: Surging internet traffic driven by AI, AR/VR, and cloud servicesunderpins KINX’s growth.
    As emerging services like AI chatbots and metaverse applications proliferate, data traffic is “expected to increase steadily,” bolstering demand for KINX’s neutral data center and network services . KINX is poised to benefit as a key infrastructure enabler for high-bandwidth services.

  • Solid Financials: KINX has a track record of stable growth and profitability. For 2023, it was forecast to achieve revenues of ~₩125 billion and operating profit of ~₩28.7 billion (around 12% YoY growth) .
    Operating margins are healthy (~23% in recent years), supported by recurring colocation and bandwidth revenue. The balance sheet is sound, and the expansion capex is manageable given cash flows.

  • Valuation Upside: Despite its unique niche, KINX has been under-the-radar and trades at moderate multiples.
    With the new capacity coming online and AI-driven demand inflecting, there is potential for re-rating. Its market cap (around ₩2,560 billion) and P/E (roughly in the low-teens based on operating earnings) appear reasonable relative to growth prospects.
    We will assess intrinsic value with a DCF based on mid-2025 financials.

 

Business Model and Industry Context: KINX’s core business is operating carrier-neutral Internet Data Centers (IDCs) and an Internet exchange.
This means clients (like content providers, cloud companies, enterprises) colocate their servers in KINX facilities and can freely connect to multiple telecom networks and cloud platforms through KINX’s exchange.
This “all-in-one connectivity” model is a competitive advantage – customers can choose any network provider and set up diverse connections, which is crucial for redundancy and performance.
KINX also provides value-added services like Content Delivery Network (CDN) caching and cloud hosting. Essentially, KINX is an infrastructure B2B provider that underpins much of Korea’s internet traffic flow.

Industry-wise, demand for data center space in Korea is climbing due to exponential data growth (video streaming, fintech, AI, etc.).
Major cloud hyperscalers (AWS, Google, MS Azure) are expanding in Korea, and local tech firms (Naver, Kakao) are building private data centers – all this creates spillover demand for neutral colocation and interconnection providers.
KINX is well-positioned as a niche leader in carrier-neutral IDC (a model similar to Equinix’s in the global market).
Barriers to entry include needing significant capital for data center builds and establishing network neutrality agreements with all major ISPs – KINX has already achieved the latter, being interconnected with all major Korean telecoms (KT, SKB, LGU+) .
This makes it hard for new entrants to replicate its network ecosystem.

Recent Performance: KINX has delivered steady growth. In 1Q 2023, revenue was ₩29.3 billion with operating profit ₩6.6 billion , a modest increase YoY. Utilization of existing data centers is high (often ~95%+ occupancy according to industry reports ), providing a stable revenue base.
The company’s new Gwacheon data center (expected service start in 1H 2024) will boost capacity, and management anticipated contracts for new space to kick in by late 2024 .
The growth thesis is that revenue will scale as this new capacity fills. Kiwoom Securities projected KINX’s 2023 full-year operating profit to rise ~11% YoY , and one can expect an acceleration in 2024–2025 once the expansion is operational.

Outlook and Investment Thesis: Looking forward, AI and high-performance computing trends in Korea could significantly benefit KINX. If Korean firms deploy AI models, they will require reliable data center infrastructure and connectivity.
Moreover, the ongoing rollout of 5G and edge computing increases the need for local caching and interconnection – KINX can play a role here as well (the company could evolve into an edge data center hub given its network-centric model).
The stock’s investment appeal lies in this combination of stable core business with potential upside from new tech trends. KINX is somewhat analogous to a “mini Equinix” in Korea, and as such, could enjoy a valuation uplift as investors appreciate the recurring revenue, high entry-barrier business model, and AI-driven growth tailwinds.

Intrinsic Valuation (DCF): Based on 2Q 2025 data, we can estimate KINX’s intrinsic value via a DCF. Assuming the new data center drives a revenue CAGR of ~15% over the next 5 years (in line with rising demand) and operating margins hold around 20–25%, KINX’s free cash flow can grow considerably.
For instance, if 2025 revenue (post-expansion) reaches ~₩140 billion, growing to ~₩280+ billion by 2030 (15% annual growth), and we use a WACC of ~9%, the DCF would likely yield a significant upside compared to the current market cap.
In simpler terms, the market is not fully pricing in KINX’s growth potential.
Even using relatively conservative growth (low-teens) and a terminal growth ~3%, our valuation suggests an equity value higher than current levels, indicating an attractive investment opportunity.
(Note: detailed DCF tables are omitted for brevity, but these assumptions align with the forecast that “AI…services will steadily increase data traffic” driving KINX’s sustained growth .)

Risks: Key risks include slower-than-expected fill rate of the new data center (if AI/cloud demand in Korea temporarily lags), competition from larger players (e.g. if telcos aggressively market their own IDCs), and technology shifts (for example, if on-premise corporate data centers decline sharply in favor of big cloud providers – though KINX can adapt by hosting cloud on-ramps). However, given its neutral niche and the overall undersupply of quality data center space in Seoul region, KINX’s risk-reward profile remains favorable.

 

Hyosung Heavy Industries (효성중공업) – High-Voltage Power Equipment Leader

 

Investment Highlights:

  • Core Provider of Power Infrastructure: Hyosung Heavy is Korea’s leading manufacturer of high-voltage electrical equipment – including gas-insulated switchgear (GIS), power transformers up to 765kV class, circuit breakers, and industrial energy storage (ESS). It also has a construction division, but the power equipment segment is the profit engine, especially with booming global demand for grid upgrades and data center power systems .

  • Record-Breaking Financial Performance: The company is in the midst of an earnings surge. In 2Q 2025, Hyosung Heavy’s revenue hit ₩1.5253 trillion with operating profit ₩164.2 billion – up 162% YoY, a record-high quarterly profit .
    This momentum accelerated in 3Q 2025, where sales grew ~61% YoY and op. profit +96% YoY, vastly beating market expectations . The driver is an order boom for high-margin UHV power gear, particularly from the U.S. and Middle East, as well as improved performance in its U.S. subsidiary .

  • AI Data Center Power Boom: A significant tailwind is the AI data center construction wave, which has led to surging demand for power infrastructure.
    As large AI data centers proliferate, they require redundant and on-site power generation equipment, leading to a shortage of transformers, switchgear, and stabilizing devices globally .
    Hyosung Heavy is directly benefiting: analysts note that AI data center projects are driving “continued power network demand”, creating a seller’s market for high-capacity power equipment .
    In fact, the company has secured long-term supply agreements with major clients through 2028, essentially booking out its expanded production capacity for years .

  • Global Market Expansion: Hyosung Heavy has unique global capabilities – notably, it operates a transformer factory in Memphis, USA (the only plant in the U.S. by an Asian firm that can produce 765kV ultra-high-voltage transformers) .
    This has positioned it to win big U.S. utility contracts. In July 2025, it signed a US order for GIS equipment worth ₩264.1 billion , and its U.S. unit’s 1Q 2025 sales jumped 139% YoY .
    The company is doubling capacity at the Memphis plant by 2026 to meet U.S. demand . Additionally, Hyosung is growing in Europe (leveraging grid replacement cycles and green energy projects) – Europe sales are expected to ramp from 2026 onwards .
    In sum, Hyosung Heavy is transforming from a domestic-focused player into a global supplier, riding a worldwide investment upcycle in power infrastructure.

  • Strong Backlog and Earnings Visibility: The heavy electric division’s order backlog was reported at ~₩1.1 trillion in early 2025 just for the U.S. business , and overall company backlog is swelling with high-margin orders.
    This provides multi-year visibility on revenue growth. Furthermore, recent orders were booked at favorable pricing (reflecting tight supply), which is improving margins.
    The company’s operating margin turned solidly positive in 2023 and is now rising structurally – analysts expect “structural improvement” in profit margins as the accumulated high-margin backlog converts to revenue from 2024 onward .

  • Valuation and Upside: Hyosung Heavy’s share price has skyrocketed in 2023–2025 (up over +156% in the first half of 2025) , crossing ₩1 million per share to become a “황제주” (emperor stock) .
    Despite this rally, many analysts see further upside given earnings are still catching up to order growth. In mid-2025, brokers like Mirae Asset and Kyobo set price targets around ₩1.18–1.22 million , which the stock soon surpassed.
    After the 3Q surprise, Daishin Securities raised its target by +46% to a lofty ₩2.70 million , reflecting conviction that the profit boom will continue.
    Using a DCF (5-year horizon) based on 2Q–3Q 2025 performance, we similarly find that intrinsic value is significantly above the mid-2025 trading levels, as detailed below.

 

Business Model and Industry Analysis: Hyosung Heavy’s business model is centered on manufacturing and servicing of electric power systems.
This includes power generation and transmission equipment (transformers, switchgears, substations) and power quality solutions (stabilizers, energy storage, STATCOMs). Utilities, industrial facilities, and data centers are its main customers.
It also has an energy storage system (ESS) division which integrates batteries and power conversion – useful for stabilizing renewable energy and backup power for large facilities . Moreover, the company is extending into turnkey solutions:
it can deliver and install entire power substations or data center power systems.

Industry-wise, we are in a global super-cycle for grid investment. Aging electric grids in North America and Europe require upgrading (many transformers are decades old), and the push for renewable energy integration and electrification (EVs, etc.) necessitates new grid infrastructure. Hyosung Heavy, as a top maker of transformers and switchgear, is capitalizing on this.
Notably, AI data centers have emerged as a new demand driver for high-end gear – in the U.S., data center operators are placing orders for large-scale power equipment (high-voltage transformers, gas-insulated switchgear) to secure enough capacity for their energy-hungry server farms .
Hyosung’s ability to deliver advanced products (like 765kV transformers and GIS) in this tight market gives it pricing power.
Competitors include global players like ABB, Siemens, GE, and local rivals like HD Hyundai Electric and LS Electric.
Interestingly, while LS Electric and Hyundai Electric also saw increased orders, Hyosung Heavy outperformed them in stock price – likely because Hyosung is more purely leveraged to heavy power equipment (LS has auto-mation and mid-voltage focus, Hyundai Electric has smaller scale). Indeed, in 2023 Hyosung’s stock doubled in 3 months even as peers saw profit-taking , underscoring its unique leverage to the AI + power grid theme.

Recent Financial Performance: The numbers have been stellar. For 2Q 2025, Hyosung Heavy’s consolidated sales were ₩1.5253 trillion (+27.8% YoY) and operating profit ₩164.3 billion (+162% YoY) .
This was a super beatover market consensus.
The heavy industry (power equipment) division was the star, with global UHV product sales expanding sharply and U.S. operations achieving high margins .
By 3Q 2025, quarterly op profit reached ₩219.8 billion , implying a run-rate far above prior years.
Net profit also improved; in 2Q it was ₩87.3 billion and likely crossed ₩100 billion in 3Q. The construction arm (which had a loss in prior quarters) turned around by 3Q with ₩24 billion op profit , adding a bonus lift.
The company’s debt is moderate and being managed, and with the jump in profits, cash flows are rising.

Outlook and Strategy: Hyosung Heavy’s outlook is very positive.
The company expects annual new orders to grow ~22% in 2025 , adding to its bulging backlog. It is expanding production capacity both domestically and in the U.S. to fulfill orders.
The AI data center trend is particularly noteworthy: as large datacenters implement “on-site power generation with N+1 redundancy”, they require multiple transformers and backup systems, straining current supply .
This plays into Hyosung’s strengths in hybrid power setups – e.g., providing the transformers, switchboards, and even battery/fuel cell systems to data center sites .
Additionally, government policies (like U.S. infrastructure spending, renewable integration efforts in Europe, and Korea’s own grid investments) provide secular tailwinds.
The company’s multi-year supply contracts through 2028 with key clients mean it has locked-in business to confidently invest in more capacity . All these factors suggest earnings will continue climbing in 2025–2027.

Valuation and Intrinsic Value: To gauge intrinsic value, we consider a DCF from a 2Q 2025 base. Given the backlog and industry trends, one could model revenue growth of ~15% CAGR over the next 5 years (which might even be conservative considering the 2025 spike).
Profit margins are rising; let’s assume operating margin stabilizes around 12–15% (the 3Q 2025 margin was ~13.5%, and could improve with scale).
Under these assumptions, Hyosung Heavy’s free cash flow would grow robustly. Using a discount rate ~10% (reflecting somewhat cyclical industrial risk), the DCF value per share comes out well above mid-2025 trading prices.
This aligns with analysts’ bullish targets. For context, when the stock was ₩1.0M in July 2025, analysts saw “plenty of upside” and set targets up to ₩1.22M . After subsequent earnings, targets went far higher (Daishin’s ₩2.7M ). Even if one takes a middle ground (say ~₩1.8–2.0M intrinsic value), it implies a strong double-digit percentage upside from Q2 2025 levels.
The optimism reflects that Hyosung Heavy is not in a one-off upcycle but at the beginning of a multi-year growth phase as its high-margin orders convert to revenue.

To put it simply, the intrinsic value is buoyed by the expectation that annual profits will be structurally higher going forward – a view supported by the company’s unprecedented backlog and the global trends discussed.
Price-to-earnings on forward 2025 earnings was not expensive given the growth (e.g., if FY25 EPS ends up around ₩150k and the stock at ₩1.5M, that’s ~10× P/E). Thus, the stock offered both growth and value at mid-2025 levels.

Risks: Key risks include execution and cycle risk. Fulfilling a large order book on schedule is challenging – any production bottlenecks or cost overruns could hurt margins.
There’s also some customer concentration risk (large orders from a few utilities or data center clients). The construction division, while smaller now, could drag if real estate markets slump.
Finally, the industry is cyclical – if global interest rates rise or if AI capacity gets overbuilt in a few years, power equipment orders might cool (as some fear a “bubble” scenario ).
However, current indicators (e.g. hyperscalers’ capex plans, government grid programs) suggest strong demand at least for the medium term. Hyosung’s broad geographic exposure (Asia, Middle East, US, Europe) also helps diversify demand.
In sum, Hyosung Heavy is a high-growth infrastructure play with manageable risks, supported by the critical need to keep the lights on in the AI era.

 

Equinix (EQIX) – Global Data Center Colocation & Interconnection REIT

 

Investment Highlights:

  • World’s Largest Colocation Platform: Equinix is the leading global provider of retail colocation data centers, operating over 270 data centers in 76 markets worldwide .
    Its business enables thousands of enterprises, cloud providers, and networks to colocate their IT infrastructure and connect with each other. Equinix’s scale and global footprint are unmatched, giving it a powerful network effect (over 10,000 customers and 492,000+ interconnections as of mid-2025) .
    It is essentially the backbone for the cloud and digital ecosystem.

  • Resilient Growth & Profitability: Equinix generates highly recurring revenues (leasing cabinet space, power, and interconnection services) with high margins.
    In 2Q 2025, revenue was $2.26 billion (up ~5% YoY) , and adjusted EBITDA margins hit a record ~50% . AFFO (Adjusted Funds From Operations, a REIT cash flow metric) per share grew ~8% YoY in 1H 2025 .
    The company consistently grows revenues mid-high single digits and AFFO ~10% annually, reflecting steady demand and pricing power. It has raised its dividend for 8 consecutive years, underscoring cash flow strength (2025 dividend ~$4.97 per share annualized).

  • AI and Cloud as Demand Drivers: The ongoing AI trend is adding incremental demand for Equinix’s services. High-performance AI deployments often require distributed, low-latency infrastructure, which benefits Equinix as a neutral colocation and interconnect provider. In 2025, Equinix noted “ongoing demand for AI, hybrid multi-cloud, and networking infrastructure” fueling high-value deals across its product set . For example, Equinix’s interconnection revenues (from services like Equinix Fabric™ that link customers to cloud providers) topped $400 million in Q2 2025, up 9% YoY – a record, driven in part by cloud and AI expansion needs . Equinix has even begun marketing certain sites as “AI-ready” data centers (with higher power density and liquid cooling) – e.g., it opened an AI-optimized facility in Chennai in 2025 . As enterprises incorporate AI, many will use Equinix to connect to AI cloud services or deploy edge AI nodes, bolstering Equinix’s growth.

  • Massive Expansion Pipeline: To meet demand, Equinix is investing heavily in new capacity. It had 59 major projects underway in 34 metros across 25 countries as of mid-2025 , including large xScale® (hyperscale) sites. In Europe alone, Equinix announced plans in 2025 to invest £4 billion in data center expansion in the UK . This expansion is de-risked by strong bookings – Equinix maintains high occupancy (>85%) on stabilized assets and often pre-leases a good portion of new builds. The company’s capital expenditures for 2025 were guided at $3.5–4.0 billion , reflecting aggressive growth capex, but its balance sheet (investment grade) and cash flows can support this. Essentially, Equinix is continuously growing its “digital real estate” footprint, which feeds into future revenue growth.

  • Valuation – Premium but Justified: Equinix, structured as a REIT, has traditionally traded at a premium valuation given its strong growth and strategic importance. As of mid-2025, it was around $820–$850 per share (implying ~25–26× forward AFFO). The average analyst 12-month target was around $960 (approx 15% upside) . While in late 3Q the company slightly trimmed its FY 2025 revenue guidance (to $9.23–9.33B, ~6% YoY growth) due to currency and other headwinds, it still expects double-digit AFFO growth . With a 5-year DCF analysis, assuming ~8–10% annual cash flow growth and a cost of equity ~7%, Equinix’s intrinsic value appears in line with or above current market prices – supporting the view that Equinix is a solid long-term compounder with reliable returns. We discuss valuation more below.

 

Business Model Overview: Equinix’s business model is leasing colocation space and selling interconnection. Customers rent space (racks/cages) in Equinix IBX® data centers and pay for power usage and cross-connects to other customers or carriers.
Equinix’s key differentiator is its rich ecosystem of networks and clouds available on-site – customers can directly connect to over 2,000 network providers and all major clouds (AWS, Azure, GCP, etc.), plus to each other.
This vendor-neutral ecosystem attracts more customers in a virtuous cycle. For example, financial firms colocate at Equinix to be next to trading exchanges, SaaS companies host in Equinix to directly connect to telecom backbones, etc.
The company also offers Equinix Fabric™, a software-defined interconnection service that lets customers virtually connect between metros and to cloud services on demand .
This has been growing fast, especially as companies adopt hybrid cloud (using multiple clouds and edge nodes). In short, Equinix is not just a landlord – it’s a critical connectivity hub for the internet.

Industry and Competitive Landscape: Equinix operates in the global data center colocation industry, which has high barriers to entry due to capital intensity, securing locations (permits, power availability), and the difficulty of replicating network ecosystems.
Its main global competitor is Digital Realty (DLR), another large REIT. While Digital Realty also has a big footprint, Equinix generally commands higher revenue per unit due to its interconnection-rich retail model (DLR historically had more wholesale/hyperscale focus).
Both are now pursuing the hyperscale market via joint ventures (Equinix xScale). The AI wave has both companies expanding – S&P Global noted in 2025 that Equinix and Digital Realty are ramping up builds as AI drives new demand .
Cloud giants sometimes build their own data centers, but they also lease from Equinix for certain use cases (especially for edge locations or quick capacity needs).
Equinix’s strategy of owning land or doing long-term ground leases (90% of development on owned land ) gives it control over its destiny, avoiding rent inflation.

One potential challenge is the massive capex and power requirements of new AI data halls – these can strain local power grids and face community scrutiny (for energy use and water for cooling). Equinix has been proactive on sustainability (aiming for 100% renewable energy usage) and exploring fuel cells, liquid cooling, etc., to handle high-density AI racks . As long as demand remains robust, Equinix can pass on higher power costs to customers (since they pay utility costs plus margin). Overall, the industry is in growth mode, with some caution about overbuilding. But given that AI and general digital transformation are secular trends, Equinix’s diversified global approach mitigates regional overbuild risk.

Recent Financials: Equinix’s financial performance through 2Q 2025 was solid. Revenue for full-year 2024 was around $8.7B, and 2025 is guided to ~$9.25B . Adjusted EBITDA is nearly $4.6B (49% margin) , indicating impressive operating leverage. AFFO – a proxy for cash flow to equity – is expected around $3.74B (or ~$38 per share) in 2025 , which is a healthy ~10% increase YoY. Importantly, bookings remain strong: In Q3 2025, Equinix reported $394M in annualized gross bookings and continued high renewal rates . Interconnection count grew by 6,200 in Q2 alone , showing customers expanding connectivity. These metrics illustrate sustained demand even as some enterprise IT spending was mixed in 2023–25.

Outlook and Growth Drivers: Equinix’s management and many industry analysts see a long runway for growth, bolstered by AI and edge computing.
For example, at Equinix’s Analyst Day 2025, the company emphasized that AI use cases will require distributed infrastructure with low latency, which in many cases means placing gear in multi-tenant data centers closer to users (rather than solely in a few giant cloud regions) .
This hybrid trend benefits Equinix. Additionally, 5G and IoT proliferation means more localized data aggregation points, again favorable to Equinix’s metro data centers.
The company is also expanding into new markets (it entered Africa via acquisition, new builds in India, etc.). While growth may be in high single to low double digits percentage-wise, for a company of Equinix’s size that is quite robust – and it is growth with high visibility.

Valuation Discussion: As a REIT, Equinix is often valued on AFFO yield or EBITDA multiples. At ~$840 stock and ~$38 AFFO/share (2025), the AFFO yield is ~4.5%.
This might seem low (i.e., stock expensive), but consider that AFFO/share is growing ~8–10% annually; thus investors are essentially paying for growth and stability. A DCF approach: taking AFFO as a proxy for cash flow, if we assume 5-year CAGR ~9% (as guided) and then a terminal growth ~3%, with cost of equity ~7% (low given stable cash flows), the implied value per share comes out around $900–1000, in line with analyst targets.
In other words, Equinix’s intrinsic value appears to be moderately above the mid-2025 market price, suggesting an attractive investment for those seeking a combination of growth and income.
Furthermore, Equinix has a history of value creation – it consistently earns high returns on invested capital and has a prudent capital structure (debt/EBITDA ~3.5×, manageable for a REIT).

Risks: Equinix’s risks include macroeconomic and interest rate factors (as a REIT, rising rates can pressure its stock and increase debt cost).
Also, any slowdown in IT spending or cloud growth could temper demand for new colo space. There’s also execution risk in its large expansion pipeline – project delays or cost overruns could impact returns.
Recently, some analysts pointed out slight margin pressures as Equinix invests heavily (EBITDA margin might be near a peak ~50%, any decline could “challenge its premium valuation” ).
However, the company’s track record suggests it can continue to grow into its valuation. It also has the ability to tap joint ventures or equity capital if needed to fund growth, thus maintaining flexibility.
Environmental and regulatory hurdles (like power usage restrictions or zoning denials) are another risk as data centers face scrutiny for resource usage.
Equinix’s focus on sustainability (e.g., using fuel cells, buying renewable power) aims to mitigate this.
Ultimately, Equinix is a core infrastructure asset for the digital economy, and while not immune to short-term headwinds, it stands to keep benefiting from the inexorable growth of data and cloud services – now amplified by the AI era.

 

Vertiv Holdings (VRT) – Critical Power and Cooling Solutions for AI Data Centers

 

Investment Highlights:

  • “Picks and Shovels” of AI Infrastructure: Vertiv is a leading provider of power supply systems, thermal management (cooling), and integrated infrastructure for data centers. Its products include uninterruptible power supplies (UPS), power distribution units, racks, cooling systems (from CRAC units to advanced liquid cooling), and modular data center solutions. In essence, Vertiv builds the electrical and cooling backbone that keeps data centers running 24/7. As such, it has become a direct beneficiary of the AI data center boom, which requires massive power delivery and heat dissipation.

  • Explosive Growth and Record Backlog: Vertiv’s recent performance has been outstanding. In 3Q 2025, it crushed expectations with 29% YoY revenue growth to $2.68 billion, and adjusted EPS of $1.24 beat consensus by ~25% . Importantly, orders surged ~60% YoY and backlog climbed to about $9.5 billion (up from $8.5B in Q2) – an all-time high, representing roughly 1.4× book-to-bill ratio. This signals that customers (like hyperscale cloud operators) are racing to secure Vertiv’s power and cooling equipment for upcoming projects. Vertiv’s operating margins have also expanded significantly – Q3 adjusted operating margin reached 22.3% , up over 200 bps YoY, thanks to operating leverage and pricing power. Free cash flow in Q3 was $462M (+38% YoY) , reflecting quality earnings. In sum, Vertiv is experiencing a breakout year in 2025, translating AI infrastructure demand into strong financial results.

  • Raised Guidance and Strong Outlook: Given the momentum, Vertiv raised its full-year 2025 guidance. It now expects FY25 revenue of $10.16–10.24B (up from prior ~$9.95–10.08B) and adjusted EPS $4.07–4.13 . This implies ~20%+ YoY revenue growth and a doubling of EPS from 2024 levels. The Q4 2025 outlook also came in above consensus, indicating sustained demand through year-end . Moreover, management indicated that to support future growth, they will increase capacity and R&D investments in late 2025 and 2026 . They plan ~$250M capex in 2025 and higher in 2026 to expand manufacturing and engineering, which is a bullish sign of anticipated order flow . Industry analysts observe that Vertiv’s 5-year revenue CAGR is around 18%, highlighting that the current success is part of a longer trend of product-market fit in a structurally growing market . Simply put, Vertiv is not just having a one-off “AI spike”; it is positioned for durable growth as digital infrastructure expands.

  • Technology Leadership and Partnerships: Vertiv’s edge comes from its broad product line and engineering know-how in high-density data center solutions. It is at the forefront of new developments like 800V DC power architectures for AI facilities – notably partnering with NVIDIA to develop an 800V DC power system tailored for GPU-driven “AI factories” . Higher-voltage DC distribution can improve efficiency for large AI datacenters, and Vertiv aims to commercialize this by 2026 alongside NVIDIA’s rollouts . Vertiv is also a leader in liquid cooling solutions, which are increasingly needed for cooling racks of AI accelerators that air cooling cannot handle. By ramping R&D in these areas , Vertiv is cementing its role as a go-to provider for cutting-edge data center builds. Its ability to deliver integrated solutions (power + cooling + monitoring as a package) gives it an edge in large projects. The company’s global service network also provides lucrative after-sales revenue (maintenance contracts, etc.), making it a comprehensive infrastructure partner for hyperscalers.

  • Stock Performance and Valuation: Vertiv’s stock has reflected its fortunes – it has been one of the best-performing “AI infrastructure” stocks, rising roughly 8× (800%+) from its 2022 lows into late 2025 . This was aided by improved execution under a new CEO since 2023 and the aforementioned AI demand inflection. As of Oct 2025, the stock traded around $190–200/share (having reached an all-time high ~$202) . This price factors in a lot of optimism; at $4.10 EPS guidance, the forward P/E is ~47x. However, analysts still largely rate it a “Buy” – the average 1-year target was around $192 (roughly flat to slightly down, reflecting that the stock had caught up to many targets) . Some more bullish forecasts see long-term upside if Vertiv continues 25% growth in 2026. We attempt a DCF based on mid-2025 as well: using the most recent annual free cash flow ($1.24B for last 12 months) and assuming a strong 5-year growth (say 15–20% CAGR in FCF) then leveling off, we find that Vertiv’s intrinsic value is highly sensitive to growth assumptions. If growth stays elevated for a few years, the DCF can justify the current price or higher. But any slowdown beyond 2026 could mean the stock was priced to perfection. We discuss this balance in the valuation section below.

 

Business Model and Market Position: Vertiv’s business is providing critical infrastructure solutions for data centers and other mission-critical facilities.
Its product segments include: Power (e.g. large UPS systems, power distribution cabinets, busways, battery systems), Thermal (computer room air conditioners, chillers, evaporative cooling, liquid cooling units), and Integrated rack systems and services.
In data center builds, Vertiv often works from the design phase with the customer to configure the entire power and cooling layout. Its ability to scale up (for example, delivering multi-megawatt power skids or custom cooling plants) makes it a preferred vendor for hyperscale projects.
Vertiv generates revenue globally – about 40% Americas, 30% Asia-Pacific, 30% EMEA (though APAC was a bit weaker recently) .
The company was originally Emerson Electric’s Network Power division, which explains its deep engineering heritage; it was spun out via SPAC in 2020.
After some initial growing pains, it has found footing by capitalizing on the data center upcycle.

The market Vertiv serves is large and growing. Every new data center (whether enterprise, cloud, or colocation) needs power and cooling equipment.
With AI, the average power per rack is rising, meaning data centers must install even more power capacity and advanced cooling per square foot. Vertiv’s CEO noted “demand is stronger than supply” in this sector, an enviable position for a supplier .
Competitors in various product lines include Schneider Electric (a global power system provider), Eaton, ABB, and Mitsubishi for UPS, and STULZ or Johnson Controls in cooling.
However, Vertiv’s broad portfolio and focus on data center applications give it a competitive edge.
It also highlights that it wins large projects where customers require a reliable, integrated solution – something Vertiv can provide due to its scale and system integration expertise .
This has led to share gains in the market, as evidenced by its outsized growth relative to the industry.

Recent Financials and Operations: We’ve touched on the headline numbers (Q3 2025 blowout).
To add detail: Vertiv’s 3Q gross margin expanded as they successfully passed on higher costs and benefited from operating leverage. Price realization and favorable mix (more high-spec orders) contributed to margin gains .
On the orders front, North America was extremely strong (+43% organic sales YoY) due to hyperscalers, while EMEA was slightly down (the company is restructuring EMEA ops to improve execution) .
The book-to-bill of 1.4× indicates the backlog is still building, not yet peaking . With $9.5B backlog, Vertiv has about 9–12 months of revenue “in hand,” which is far higher visibility than normal (they typically had ~6 months backlog historically).
This reflects big multi-quarter orders for AI projects. The company’s balance sheet by Q3 improved – net leverage dropped to ~0.5× EBITDA after using strong cash flows to pay down debt, and Moody’s upgraded them to Ba1 (almost investment grade) .
They even initiated a small dividend in 2025, signaling confidence (albeit yield is <0.1%). All these point to a company firing on all cylinders operationally.

Outlook and Strategy: Looking ahead, Vertiv’s management is “leaning in” – they are aggressively investing in innovation and capacity to capitalize on what they see as a multi-year uptrend .
The CEO mentioned the market’s “insane appetite” but tempered by supply constraints – essentially, demand is so high that even if some AI plans slip, there is plenty to fill the gap.
Vertiv expects its cloud/hyperscale segment to grow ~15–17% annually for the next five years (per a late 2024 investor briefing) , and so far that seems on track or even conservative.
Key growth initiatives: expanding manufacturing lines for power systems, ramping production of liquid cooling units, and ensuring they can deliver integrated “turnkey” modules quickly. Vertiv also will benefit from trends like edge data centers and 5G infrastructure (it sells telecom power systems too), though the big driver in the near term is clearly large AI data halls. Analysts forecast Vertiv’s earnings to grow +34% in 2025 and +25% in 2026 – very high growth for a hardware company.
This is why the market has been willing to assign a rich multiple; Vertiv is seen as a rare pure-play to ride the AI infrastructure wave.

Valuation and Intrinsic Value Considerations: Vertiv’s valuation, after the huge stock run, is arguably full – unless it continues to outperform. Let’s evaluate via DCF: taking 2025 expected FCF around $1.3B (the company guided $1.5B adjusted free cash for 2025 , but some of that will fund working capital for growth), and assuming, say, 15% growth in FCF for the next 5 years (which aligns with revenue growth decelerating from ~20% to low-teens by 2030).
Using a discount rate ~8% (justified by strong growth but also some cyclicality), and then a terminal growth ~3%, we find the DCF might justify a market cap roughly in the $35–40B range – which is where it stood at $190/share.
This suggests the stock in late 2025 was near intrinsic value if optimistic growth is realized.
The upside could come if Vertiv sustains higher-than-expected growth or margins (for example, if AI demand doesn’t taper and they keep 20%+ margin).
Conversely, any hint of slowdown (order pushouts, competition) could cause a sharp correction from these heights.

It’s worth noting that Vertiv’s own execution has vastly improved since 2021 (when supply chain issues hurt them).
The market seems to believe in the new management’s ability to deliver (both literally and figuratively). As one analyst put it, the question is no longer “is the AI cycle real?” but “how long can it run and how high can Vertiv’s margins go?” .
Vertiv’s “central infrastructure” role in the digital age is cemented, as evidenced by its swollen order book .
Thus, for an investor in mid-2025, Vertiv offered high-growth exposure to AI infrastructure, though at a price that assumes flawless continuation of current trends.
In intrinsic value terms, it likely had less margin of safety than, say, the steadier Equinix or the earlier-stage KINX – but it also has the highest growth potential.

Risks: The primary risks for Vertiv include potential cycle peaks – if hyperscalers suddenly moderate capex (for instance, after an initial burst of AI data center build-out, they might digest capacity for a while), Vertiv’s orders could slow.
The company noted some lumpiness and dependence on a few big customers’ timing . Tariffs and supply chain issues (like electronic component availability) still pose risks to cost and delivery timelines .
Also, Vertiv’s EMEA region is under restructuring; success there is needed to fully capitalize on global demand. Competition is another factor: if more players enter the high-density cooling space or Chinese companies undercut prices in APAC, margins could be pressured.
That said, Vertiv’s scale and reputation for reliability are protective moats – big data center clients are risk-averse and prefer trusted suppliers. The company’s own commentary exhibits a healthy paranoia (“what can go wrong?” culture ) which is good to keep complacency at bay.

In conclusion, Vertiv stands out as a top pick in the AI infrastructure value chain for those seeking growth.
It complements the other selections: where Equinix provides the real estate and connectivity, Vertiv provides the essential hardware inside data centers.
Together, companies like these ensure that as AI models grow ever larger and more powerful, the underlying infrastructure – power, cooling, network, and facilities – can support them.
The investment thesis for Vertiv is that the digital gold rush (AI) will keep fueling demand for its “shovels,” i.e., data center power/cooling gear, for years to come.
So far, 2025’s results strongly support this thesis, and we anticipate further growth into 2026 underpinned by the robust backlog and continued AI-driven expansion plans across the tech industry.

 

Conclusion

 

The AI revolution is not only about algorithms and chips – it also rests on physical infrastructure. As Jensen Huang noted, having strengths in manufacturing and infrastructure gives countries (and companies) a competitive edge in this new era. Our analysis highlights four companies capitalizing on this AI infrastructure boom:

  • KINX – carving out a critical niche in Korea’s internet and cloud infrastructure with its neutral data centers, poised for growth as data traffic soars.

  • Hyosung Heavy Industries – riding an unprecedented wave of demand for power equipment, fueled in part by AI data centers’ voracious energy needs and global grid upgrades, resulting in record earnings and a multi-year growth runway.

  • Equinix – the stalwart global data center operator, steadily expanding to connect the world’s digital ecosystems, and now positioning its facilities to serve the high-density and low-latency requirements of AI workloads.

  • Vertiv – the high-growth “arms supplier” for data centers, delivering the power and cooling solutions that enable AI hardware to function, experiencing explosive order growth as the AI datacenter build-out accelerates.

 

Each of these firms presents a compelling investment idea: from stable, dividend-paying infrastructure REIT (Equinix) to high-octane growth stock (Vertiv), and from local champion (KINX) to global leader (Hyosung Heavy) in their domain. They all benefit from strong industry trends – exponential data growth, AI deployment, and the urgent need to upgrade power and IT infrastructure – and they have clear competitive advantages in their business models.

In terms of valuation, our analysis (using recent financials up to 2Q/3Q 2025 and DCF estimates) suggests that:

  • KINX and Hyosung Heavy appeared undervalued relative to their growth prospects, offering significant upside as the market catches on to their AI-related potential (e.g., Hyosung’s order book translating to future earnings, KINX’s new capacity filling with high-margin customers).

  • Equinix, while not “cheap,” provided a reliable growth-at-reasonable-price proposition, justified by its consistency and unique positioning; it remains a core infrastructure holding with moderate upside.

  • Vertiv had rallied strongly (reflecting a re-rating as an AI play), but if one believes in a multi-year secular upcycle, it could still deliver further gains – albeit with less margin for error.

 

Overall, an infrastructure-focused portfolio for the AI era could be well-served by a mix of these names, balancing risk/return. By investing in the picks and shovels – the data centers, power systems, and networks – one can gain exposure to the AI boom in a potentially more durable and diversified way than chasing individual AI software startups. The companies profiled here have tangible assets, real revenues, and in many cases backlog or contracts that underpin their intrinsic value.

In conclusion, as AI continues to transform industries, the demand for physical infrastructure – from electrons to server racks – will remain robust. South Korea’s strength in manufacturing heavy equipment (exemplified by Hyosung Heavy) and running high-tech internet infrastructure (like KINX’s operations), together with global players like Equinix and Vertiv, form the backbone enabling AI’s growth. Investors should keep an eye on this “below the surface” value chain. The flashy AI applications may grab headlines, but it’s these foundational infrastructure companies that quietly ensure the AI revolution actually runs. And as our research indicates, they offer compelling investment opportunities in their own right, with solid business models and promising financial trajectories heading into 2025 and beyond.

Sources:

 

Reference : 

LS ELECTRIC 기업 분석 – 2025년 주가 분석

AI 벨류체인 반도체 유망주 5선 (2025년 11월 기준)

 

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