One under-the-radar stock linked to the artificial intelligence supply chain — particularly Nvidia’s — is a hot favorite among analysts right now. That’s Taiwan-listed Delta Electronics , an electronics manufacturing firm. Twenty analysts raised their price targets for the stock, none lowered it and only one kept it unchanged it in the past two weeks, according to a CNBC Pro screen using FactSet. CNBC Pro screened for stocks that had their price targets raised in that period by all analysts covering them. In a recent report, Morgan Stanley flagged stocks that would benefit from the liquid cooling required for Nvidia’s GPU (graphics processing unit) server rack systems in data centers. That is set to create a $4.8 billion market by 2027, it said. Delta Electronics is Morgan Stanley’s top pick to play that opportunity. The bank said it believes Delta’s liquid cooling product will add $280 million in AI cooling revenue in 2025. “We like its integrated solution for both power and cooling offerings for data centers. We think it offers the most effective design to hyperscalers and data center operators, as it aims to lower the total cost of ownership while meeting PUE requirements,” the bank’s analysts wrote. PUE, or power usage effectiveness, is an efficiency metric for power consumption in data centers. Morgan Stanley noted that Delta has been a major cooling fan supplier for server racks for more than 10 years. “In addition, the CDU design for liquid cooling systems requires knowhow in terms of the integration of power and cooling,” it said, referring to cooling distribution units in liquid cooling systems. It noted that Delta is already working — in collaboration with another firm, Lite-On Tech — to develop such an integrated liquid cooling system. Morgan Stanley raised its price target for Delta from 400 to 488 New Taiwan dollars ($12.20 to $14.90), representing around 19% potential upside. Delta shares are up 32.8% year-to-date. Jerry Chen, equity research analyst at Yuanta Investment, said AI will boost multiple products under Delta. That includes not just cooling products but also power supply units in AI servers, among others. “Those … products will benefit from amount and [specification] upgrades driven by AI,” he told CNBC Pro via email on Wednesday. “For a longer view, Delta aims to provide total power solution for datacenter,” he said, adding that includes for grids, uninterruptible power supply systems, as well as GPUs and servers. “[It] is taking effort to develop technologies and achievements in those areas. Those will lead to revenue and EPS growth significantly in the next couple years,” said Chen. His price target for Delta is also 488 New Taiwan dollars. But Morningstar equity analyst, Phelix Lee, wasn’t as optimistic, saying Delta shares are trading at 23 times its 2025 price-to-earnings ratio — above its five-year historical average of 20 times. “Shares appear overvalued as the bullish outlook in artificial intelligence servers is not enough to offset sluggish automation and electric vehicle outlook,” he said. The stock is “pricing in excessive gross margin expansion,” Lee said, adding that its 4% to 5% revenue exposure to AI servers in 2024 is not enough to support its valuation. “This exposure is similar to EV components two years ago when they made up 6% of firmwide revenue then. We view AI growth in the next two to three years as akin to EV-related growth back then, and unlikely to structurally accelerate earnings per share growth in the next five years,” he said.
