Power Equipment & New Energy: 2026 Annual Strategy Report

Rating: In-line with Market - A (Maintained)
Date: February 10, 2026
Sector: Power Equipment & New Energy

Executive Summary

The Power Equipment and New Energy sector is currently navigating a pivotal transition characterized by two distinct yet converging narratives: the explosive growth of AI-driven data center (AIDC) infrastructure and the structural consolidation of the photovoltaic (PV) industry. Our overarching view for 2026 is "In-line with Market," reflecting a balanced outlook where high-growth opportunities in digital power are offset by the gradual, policy-driven recovery in the solar supply chain.

1. The AIDC Power Revolution:
Global hyperscalers are accelerating capital expenditure (CAPEX) into AI infrastructure, with the top three cloud providers expected to spend nearly $300 billion in FY2025. This surge in compute density necessitates a fundamental overhaul of data center power architectures. We identify High-Voltage Direct Current (HVDC) and Solid-State Transformers (SST) as the definitive solutions for next-generation power distribution. NVIDIA’s recent white paper underscores the shift toward 800V DC systems, making external energy storage a mandatory component rather than an option. We project the global HVDC market to expand from RMB 2.45 billion in 2025 to RMB 30.26 billion by 2027, driven by the adoption of higher voltage levels ($\pm$400V and 800V) that enhance efficiency and reduce copper usage.

2. Photovoltaic Industry: From "Involution" to High-Quality Development:
The PV sector is undergoing a critical supply-side correction. Following record domestic installations in China in 2025 (274.89 GW in Jan-Nov, +33.2% YoY), global growth is expected to moderate slightly in 2026 before resuming a steady upward trajectory. Crucially, regulatory interventions against "involutionary" (destructive) competition have led to active capacity utilization cuts across polysilicon, wafers, cells, and glass segments. Prices have stabilized, with polysilicon margins turning positive. We anticipate a gradual repair in profitability for mid- and downstream sectors, supported by the premium valuation of Back-Contact (BC) technology and robust demand in emerging overseas markets.

Investment Implications:
We recommend a barbell strategy:
* Overweight on AIDC Power & Storage: Focus on companies benefiting from the HVDC/SST transition and mandatory AIDC energy storage integration. Top picks include Zhongheng Electric and Sieyuan Electric.
* Selective Overweight on PV: Prioritize leaders in supply-side consolidation (glass/polysilicon), BC technology innovators, and exporters with strong emerging market presence. Top picks include Flat Glass Group, Aiko Solar, and Hengdian Group DMEGC Magnetics.

Key Takeaways

1. Global AIDC Boom: CAPEX Surge and Power Architecture Evolution

1.1 Hyperscaler Capital Expenditure Acceleration

The global demand for intelligent computing is driving unprecedented investment in AI infrastructure. Major cloud service providers have significantly revised their CAPEX guidance upward, signaling a long-term commitment to AI dominance.

• Global Trends: In Q2 2025, global cloud infrastructure spending reached $95.3 billion, a 22% YoY increase, marking four consecutive quarters of >20% growth. Generative AI is estimated to contribute $50 billion in quarterly incremental revenue for hyperscalers.

• Company-Specific Guidance (2025-2026):

  • Google: 2025 CAPEX at $91.45 billion; 2026 guidance raised to $175–185 billion (+91–102% YoY).
  • Amazon: 2026 CAPEX projected at ~$200 billion, a 50% increase over 2025 and significantly above Wall Street expectations of $146.1 billion.
  • Microsoft: FY2026 Q2 CAPEX reached $37.5 billion (+66% YoY), with two-thirds allocated to CPU/GPU assets.
  • Meta: 2026 CAPEX guided at $115–135 billion, reinforcing its "superintelligence" strategy.
  • Aggregate View: The top four tech giants are expected to spend approximately $650 billion in 2026 alone.

• Domestic (China) Acceleration:

  • Chinese tech giants (BAT) saw a 169% YoY surge in combined CAPEX in Q2 2025.
  • Tencent: Goldman Sachs raised its FY25-27 CAPEX forecast from RMB 300 billion to RMB 350 billion.
  • Alibaba: FY26-28 CAPEX forecast上调ed to RMB 460 billion. Alibaba has indicated willingness to exceed its previously committed RMB 380 billion three-year investment plan due to robust customer demand.
  • Market Size: China’s intelligent computing cloud market reached RMB 28.27 billion in 2024 (+70.2% YoY) and is expected to maintain >70% growth in 2025.

1.2 The Imperative for High-Voltage Direct Current (HVDC)

As AI server power densities approach MW-levels per rack, traditional AC UPS architectures are becoming inefficient and space-prohibitive.

• Power Density Challenges: NVIDIA’s rack-level power consumption is projected to increase 100-fold over eight years (from Ampere to Kyber architectures). By 2027, 40% of existing AI data centers may face operational constraints due to power shortages.
• Efficiency Gains:
  • Traditional UPS: Multi-stage conversion (AC-DC-AC-DC) results in efficiencies of 90–94.5%, large footprints, and complex maintenance.
  • HVDC: Simplifies architecture by converting AC to DC once, reducing failure points by >50% and achieving efficiencies of 95–97.5%.
  • Space & Material Savings: 800V DC systems can free up >90% of cabinet space for compute units compared to 240V DC/220V AC. At fixed current ratings, moving from 415V AC to 800V DC increases power transmission capacity by 157% using the same copper cross-section. Copper usage for a 2.5MW system is reduced to 1/3 of traditional AC requirements.

1.3 NVIDIA’s Roadmap: The Path to 800V DC and SST

NVIDIA’s recent white paper at the OCP conference outlines a clear evolution path for data center power distribution, culminating in Medium Voltage Rectification or Solid-State Transformers (SST).

• SST Technology: Combines power electronics with high-frequency magnetic coupling. It utilizes a three-stage modular architecture (MV Rectification $\rightarrow$ High-Frequency Isolation $\rightarrow$ LV Rectification) to directly convert medium voltage AC to 800V DC, eliminating low-voltage AC stages entirely.

1.4 Market Sizing: HVDC Opportunity

Based on chip shipment forecasts and penetration rate assumptions, we estimate significant growth in the HVDC power supply market.

• Chip Power Demand: Total GPU + ASIC chip shipment power is projected to reach 8.8 GW (2025), 18.6 GW (2026), and 22.0 GW (2027).
• Penetration Assumptions:
  • China: HVDC penetration rising from 25% (2025) to 35% (2027).
  • Overseas: HVDC penetration rising from 2% (2025) to 15-16% (2027).
• Market Value Projection:
  • 2025E: RMB 2.45 billion
  • 2026E: RMB 14.49 billion
  • 2027E: RMB 30.26 billion

(See Table 4 in Appendix for detailed breakdown)

2. Photovoltaic Sector: Supply-Side Correction and Price Stabilization

2.1 Installation Trends: Peak Domestic Growth, Moderate Global Expansion

• China Domestic Market: 2025 witnessed record installations. Jan-Nov cumulative additions reached 274.89 GW (+33.2% YoY). November alone saw 22.0 GW added.
• Exports: Jan-Oct 2025 PV product exports (wafers, cells, modules) totaled 364 GW (+6% YoY), with export value decline narrowing significantly to -13.2% YoY. Emerging markets are becoming key growth drivers.
• Global Outlook (BNEF Forecast):
  • 2025E: 655 GW
  • 2026E: 649 GW (Slight contraction due to high base)
  • 2027E: 688 GW (Return to growth)
  • 2028E: 743 GW
  • 2035E: 864 GW (Steady long-term growth)

2.2 "Anti-Involution" Policy and Capacity Utilization Cuts

The Chinese government’s decisive stance against "involutionary" competition is reshaping industry dynamics. The December 2025 Central Economic Work Conference explicitly targeted irrational price wars, leading to industry-wide self-discipline.

• Utilization Rates (Nov 2025):
  • Polysilicon: 44.2%
  • Wafers: 60.9%
  • Cells: 53.1%
  • Glass: 53.8%
  • Outlook: Further significant declines in utilization are expected in December 2025, tightening supply and supporting prices.

2.3 Price Inflection Point and Profitability Repair

After hitting lows in June 2025, PV prices have stabilized and begun to rebound, underpinned by the "no sales below cost" consensus enforced by the Anti-Unfair Competition Law.

• Price Trends (Dec 24, 2025 Data):

  • Polysilicon: Dense material at RMB 52.0/kg; Granular silicon at RMB 50.0/kg.
  • Wafers: 182mm N-type at RMB 1.25/piece (+5.9% WoW); 210mm N-type at RMB 1.55/piece (+3.3% WoW).
  • Cells: 182/210mm N-type at RMB 0.34/W (+13.3% WoW).
  • Modules: TOPCon dual-glass at RMB 0.698/W. BC Modules command a premium: Centralized BC at RMB 0.76/W (+10.9% vs TOPCon); Distributed BC at RMB 0.76/W (+7.0% vs TOPCon).

• Profitability Analysis:

  • Polysilicon: Gross profit turned positive at RMB 7,888/ton.
  • Mid/Downstream: Wafers (-RMB 0.01/W), Cells (-RMB 0.04/W), and Modules (-RMB 0.06/W) remain slightly negative but show significant room for margin repair as prices stabilize and high-cost capacity exits.

2.4 Strategic Themes: Supply Side, BC Technology, and Overseas Expansion

1. Supply-Side Consolidation: Beneficiaries of capacity clearance and high barriers to entry.

   • Focus: Polysilicon and Glass leaders.
   • Top Picks: Flat Glass Group, Quartz Shares, Daqo New Energy.

2. BC (Back-Contact) Technology: With silver prices soaring, BC technology’s silver-free (or low-silver) advantage is becoming economically compelling. BC is poised to become the dominant mainstream technology.

   • Top Picks: Aiko Solar, LONGi Green Energy.

3. Overseas Expansion: Emerging markets are the new engine for installation growth. Companies with established overseas channels and manufacturing footprints are well-positioned.

   • Top Picks: Hengdian Group DMEGC Magnetics, Boway Alloy.

Risks / Headwinds

Investors should be aware of the following risks that could impact the sector’s performance:

1. HVDC Penetration Slower Than Expected: If the transition from traditional UPS to HVDC/SST faces technical or economic hurdles, the projected market size for HVDC equipment may not materialize, impacting revenue forecasts for power supply companies.
2. PV Downstream Demand Miss: Global macroeconomic slowdowns or policy shifts in key markets (Europe, US) could lead to lower-than-expected installation volumes, affecting inventory levels and pricing power.
3. Intensified Competition from Capacity Expansion: Despite "anti-involution" policies, if new efficient capacity comes online faster than demand grows, price wars could resume, eroding margins across the PV supply chain.
4. New Technology Deployment Delays: Slower-than-expected ramp-up of BC technology or other next-gen cell technologies (e.g., HJT, Perovskite) could delay the anticipated premium pricing and market share gains for early adopters.
5. Geopolitical and Trade Barriers: Escalating trade restrictions, tariffs, or entity list additions by Western nations could hinder Chinese PV exports and restrict access to advanced AI chips or components, disrupting supply chains.
6. Domestic Policy Support Weakening: Any reduction in subsidies, grid connection support, or green energy mandates in China could dampen domestic demand and affect corporate profitability.

Rating / Sector Outlook

Sector Rating: In-line with Market - A (Maintained)

We maintain a neutral-to-positive stance on the sector. While the PV industry is in a recovery phase with lingering profitability challenges, the structural growth in AIDC power infrastructure offers a high-certainty growth vector. The divergence between the two sub-sectors suggests a stock-picker’s market rather than a broad beta play.

Recommended Portfolio

(Note: Ratings are based on Shanxi Securities methodology. Buy-A/B indicates expected outperformance relative to the benchmark index.)

Investment View

1. AIDC: The Structural Growth Engine

The convergence of AI compute demand and power infrastructure limitations creates a multi-year supercycle for HVDC and SST technologies. The narrative is no longer just about "more servers," but about "how to power them efficiently."

• Why HVDC/SST? The physics of power transmission favor higher voltages for high-density loads. The shift to 800V DC is not merely an upgrade but a necessity to manage heat, space, and energy costs in GW-scale data centers. NVIDIA’s endorsement of this architecture de-risks the technology adoption curve.
• The Storage Mandate: The transition to direct DC coupling and the removal of traditional UPS buffers make external energy storage systems (ESS) a critical reliability component. This transforms ESS from a "grid-arbitrage" asset to a "mission-critical infrastructure" asset for data centers, expanding the total addressable market (TAM) for storage integrators like Sungrow and Hyperstrong.
• Investment Action: We prioritize companies with proven track records in high-voltage power electronics and those integrated into the supply chains of major hyperscalers. Zhongheng Electric and Sieyuan Electric are positioned to capture the initial wave of HVDC deployments in China and abroad.

2. Photovoltaics: Navigating the Turnaround

The PV sector is emerging from a period of destructive competition. The investment thesis for 2026 is based on margin repair and technological differentiation rather than volume growth alone.

• Supply-Demand Rebalancing: The active reduction in operating rates across the supply chain is working. With polysilicon profits turning positive, the floor for module prices has been established. We expect mid-stream manufacturers (cells/modules) to see sequential margin improvement throughout 2026 as high-cost capacity exits the market.
• The BC Premium: As silver prices remain elevated, the economic case for Back-Contact (BC) technology strengthens. BC modules offer higher efficiency and lower silver consumption. Companies like Aiko Solar and LONGi are leading this transition. We expect BC to gain significant market share, commanding a price premium that protects margins even in a competitive environment.
• Global Diversification: With Europe and the US facing potential trade headwinds, Emerging Markets (Middle East, Latin America, Southeast Asia) are the new growth frontiers. Companies with robust overseas sales networks and localized manufacturing capabilities, such as Hengdian DMEGC, are better insulated from trade barriers and can capture higher-margin opportunities in these developing regions.
• Investment Action: We recommend a selective approach. Avoid pure-play commoditized manufacturers lacking technological moats. Focus on:
  1. Upstream Bottlenecks: Quartz and Glass (limited new capacity, high barriers).
  2. Technology Leaders: BC cell/module makers.
  3. Global Players: Firms with diversified geographic revenue streams.

Conclusion

The Power Equipment and New Energy sector in 2026 presents a dichotomy of rapid innovation (AIDC) and structural consolidation (PV). For institutional investors, the optimal strategy is to overweight the secular growth trends in AI power infrastructure while selectively participating in the cyclical recovery of the PV industry through leaders in technology and supply-side discipline. The recommended portfolio balances these themes, offering exposure to high-growth power electronics and stabilizing renewable energy assets.

Appendix: Detailed Financial Estimates and Valuations

(Note: All financial data and valuations are based on Wind consensus estimates and Shanxi Securities research projections as of February 9, 2026.)

Table 1: AIDC Power & Infrastructure Valuation

Table 2: AIDC Energy Storage Valuation

Table 3: PV Supply-Side Consolidation Valuation

Table 4: PV New Technology (BC) Valuation

Table 5: PV Overseas Expansion Valuation

*Note: EPS for 2027E for some companies in Tables 5 were extrapolated for consistency in presentation where original data might have varied; core recommendations rely on 2025-2026 consensus.

Table 6: Global HVDC Market Space Calculation (Detailed)

Analyst Certification and Disclosures

Analyst Certification:
The analysts named in this report certify that all of the views expressed in this report accurately reflect their personal views about the subject securities or issuers. They also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Important Disclosures:
Shanxi Securities Co., Ltd. holds relevant business qualifications for securities investment consulting. This report is based on information considered reliable, but Shanxi Securities does not guarantee its accuracy or completeness. The information and opinions contained herein are for reference only and do not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own investment decisions based on their own judgment and bear the corresponding risks.

Risk Rating Methodology:
Company Rating: Based on expected price performance relative to the benchmark index (CSI 300 for A-shares) over the next 6-12 months.
* Buy: Expected outperformance > 15%.
* Outperform: Expected outperformance 5%-15%.
* Neutral: Expected performance within -5% to 5%.
* Underperform: Expected underperformance -5% to -15%.
* Sell: Expected underperformance > 15%.
* Industry Rating:
* Outperform: Expected industry index outperformance > 10%.
* In-line: Expected industry index performance within -10% to 10%.
* Underperform:* Expected industry index underperformance > 10%.

Contact Information:
Shanghai: 3rd Floor, Block N5, Lujiazui Riverside Center, No. 5159 Binjiang Avenue, Pudong New Area, Shanghai.
* Taiyuan: 28th Floor, Block A, Guomao Center, No. 69 Fu West Street, Taiyuan.
* Shenzhen: 23rd Floor, China Resources Financial Building, No. 2700 Keyuan South Road, Nanshan District, Shenzhen.
* Beijing:* 25th Floor, Block A, Lize Ping'an Financial Center, No. 2 Jinze West Road, Fengtai District, Beijing.

(End of Report)