U.S. Turns to Korean Ship Engines for Data Centers... Growing Hopes for Prolonged Shipbuilding Stock Boom

Ship Engine Orders for U.S. Data Centers Continue
Potential for Prolonged Boom in Korean Shipbuilding Stocks

With the artificial intelligence (AI) revolution driving a surge in data center construction across the United States, domestic shipbuilders are expanding exports of engines originally designed for ships, as the supply of power equipment struggles to keep pace. The expansion of ship engine exports is fueling hopes that the shipbuilding sector will overcome concerns about peaking out and continue to enjoy long-term prosperity.

Ship Engine Orders for U.S. Data Centers Continue

According to the financial investment industry on April 29, the SOL Shipbuilding Equipment Index ETF posted a 49% stock price increase for April through the previous day. During the same period, the KODEX Shipbuilding TOP10 ETF rose by 34.7%, the SOL Shipbuilding TOP3 Plus ETF by 33.2%, and the TIGER Shipbuilding TOP10 ETF by 31.3%. These returns far outperformed the KOSPI, which rose by 31%, and the KOSDAQ, which climbed by about 15% over the same period.

In particular, the SOL Shipbuilding Equipment ETF's returns significantly outpaced the index. This was driven by expectations that ship engines from companies included in the ETF—such as Hanwha Engine, HD Hyundai Marine Engine, STX Engine, and HD Hyundai Marine Solution—will be used in AI data centers, with these expectations already reflected in stock prices. Hanwha Engine's stock price soared by 82.6% in April alone, while STX Engine surged by 87.2%, HD Hyundai Marine Engine by 52.3%, and HD Hyundai Marine Solution by 50.9%.

Investor attention in Korea turned sharply toward ship engine-related companies after news broke on April 16 that Finnish ship engine manufacturer Wärtsilä had signed a contract to supply 40 gas engines for a data center project in Ohio, United States. Subsequently, on April 22, HD Hyundai Heavy Industries disclosed its first-ever contract to supply land-based power generation engines worth 627.1 billion won to Aperion Energy Group, a U.S. energy infrastructure company, sparking a surge in related company stock prices.

AI data centers use gas generators as a primary source of power. As demand for large gas turbines used in these generators rapidly increases, the top three manufacturers—GE Vernova, Mitsubishi Heavy Industries, and Siemens Energy—have been unable to keep up with demand. In response, data center operators have begun adopting power generation solutions using medium- and small-sized gas engines and ship engines, which has created new opportunities for Korean companies.

Yang Seungyoon, a research analyst at Eugene Investment & Securities, said, "While large gas turbine manufacturers have delivery times of about three to four years, engine companies can deliver in about two years, giving them an advantage in terms of speed. If the supply bottleneck among turbine manufacturers continues, demand for land-based power generation engines is also expected to continue rising."

HiMSEN Heavy-Duty Engine for Land-Based Power Generation by HD Hyundai Heavy Industries

Potential for Prolonged Boom in Korean Shipbuilding Stocks

As a result, the valuations of ship engine manufacturers such as Hanwha Engine, HD Hyundai Marine Engine, and STX Engine are soaring. STX Engine produces land-based power generation engines (four-stroke engines) suitable for data center use, while Hanwha Engine is set to complete a medium-speed engine plant for its four-stroke business in July. HD Hyundai Marine Engine manufactures and supplies turbochargers, a key component of four-stroke engines.

There is also growing interest in HD Hyundai Marine Solution, which holds an exclusive position in after-sales management (AM) for HD Hyundai Heavy Industries' engine division. Because power generation engines run 24 hours a day, consumable replacements and maintenance are needed far more frequently than for ship engines, allowing these companies to generate ongoing, high-value-added revenue.

Experts believe that this "engine boom" will not be limited to a one-off positive event. The global ship market is already experiencing demand for eco-friendly replacements, and the massive new market created by AI-driven power demand is being added on top. Baek Juho, a research analyst at Hyundai Motor Securities, predicted, "If additional orders for four-stroke engines for U.S. data centers continue, we can expect upward revisions in earnings estimates for related companies, valuation rerating, and further stock price gains."

This content was produced with the assistance of AI translation services.