A group of low-profile stocks related to the artificial intelligence supply chain – specifically Nvidia’s stock – are currently favored by analysts. This is Delta Electronics, an electronics manufacturing company listed in Taiwan. According to a CNBC Pro screen using FactSet, 20 analysts have raised their price targets on the stock in the past two weeks, none have lowered their targets, and only one analyst has maintained their price targets unchanged. CNBC Pro screened all stocks for which analysts raised their price targets during the period. In a recent report, Morgan Stanley identified a number of stocks that would benefit from the liquid cooling needed for Nvidia’s data center GPU (graphics processing unit) server rack systems. This is said to create a market worth $4.8 billion by 2027. Delta Electronics is Morgan Stanley’s first choice to capitalize on this opportunity. The bank said it believes Delta’s liquid cooling products will add $280 million to AI cooling revenue in 2025. Center operators offer the most efficient design as it targets lower total cost of ownership while meeting PUE requirements,” the bank analysts wrote. PUE (Power Usage Effectiveness) is an efficiency indicator of data center power consumption. Morgan Stanley noted that Delta has been a major supplier of cooling fans for server racks for more than a decade. “In addition, CDU design for liquid cooling systems requires expertise in power and cooling integration,” it said, referring to the cooling distribution unit in a liquid cooling system. It noted that Delta is already working with another company, Lite-On Tech, to develop this integrated liquid cooling system. Morgan Stanley raised its price target for Delta Air Lines to NT$488 from NT$400 (US$12.20 to US$14.90), representing a potential upside of approximately 19%. Delta Air Lines shares have risen 32.8% so far this year. Jerry Chen, an equity research analyst at Yuanta Investment, said artificial intelligence will drive the development of many of Delta’s products. This includes not only cooling products, but also power supply devices in artificial intelligence servers. “These… products will benefit from AI-driven volume and (specification) upgrades,” he told CNBC Pro via email on Wednesday. “In the long term, Delta’s goal is to provide comprehensive power solutions for data centers,” he added, including power grids, uninterruptible power supply systems, and GPUs and servers. “(It) is working hard to develop technologies and results in these areas. These will bring significant growth in revenue and earnings per share in the next few years,” Chen said. His target price for Delta Air Lines is also NT$488. But Morningstar equity analyst Phelix Lee is less optimistic. He said that Delta Air Lines’ stock price currently trades at 23 times 2025 price-to-earnings ratio, which is higher than the five-year historical average of 20 times. “The stock price appears to be overvalued as the optimistic outlook for artificial intelligence servers is not enough to offset the sluggish outlook for automation and electric vehicles,” he said. Lee said the stock is “priced for gross margin overextension,” adding that 2024 An annual AI server revenue exposure of 4% to 5% is not enough to support its valuation. “This risk is similar to electric vehicle parts two years ago, when they accounted for 6% of company-wide revenue. We believe that the growth of artificial intelligence in the next two to three years is similar to the growth related to electric vehicles at that time, and is unlikely to be structurally to accelerate the growth of revenue per unit.
