[Weekend Money] Why Shipbuilding Stocks Are Smiling Amid Rising AI Data Center Demand

As demand for artificial intelligence (AI) data centers rises, the supply of gas turbines required for power generation is failing to keep pace, drawing attention to marine engine manufacturers for their power generation engines.

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On April 26, Eugene Investment & Securities identified HD Hyundai Heavy Industries and STX Engine as domestic companies likely to benefit from this trend. In particular, the firm maintained its target price of 8.7 million won and a 'Buy' rating for HD Hyundai Heavy Industries, which recently secured a contract on April 22 to supply land-based power generation engines for a data center in Texas, United States.

With the advancement of AI, demand for data centers continues to climb. The International Energy Agency (IEA) projects that electricity consumption by data centers will double, from 485 terawatt-hours (TWh) last year to 950 TWh by 2030. This would account for 3% of global electricity demand.

While data centers utilize renewable and low-carbon energy sources, natural gas-based power generation also plays a key role. However, the main suppliers of large-scale gas turbines-GE Vernova, Mitsubishi Heavy Industries, and Siemens Energy-are unable to meet the growing demand.

According to a meeting last month between Eugene Investment & Securities and Mitsubishi Heavy Industries, the latter plans to increase its gas turbine production capacity by more than 30% compared to 2024, with the effects of this expansion expected to be fully realized after 2027. Mitsubishi Heavy Industries reportedly stated, "There is an internal directive to double production, but it is a challenging task because it requires not only ramping up turbine output, but also collaborating with suppliers of generators and other peripheral equipment."

As a result, engine manufacturers are emerging as alternatives to large gas turbine suppliers, whose delivery schedules are slow. Seungyoon Yang, a researcher at Eugene Investment & Securities, noted, "While large gas turbine suppliers are quoting delivery dates for the second half of 2029 to 2030, engine manufacturers can meet delivery as early as the second half of 2028." He added, "Assuming supply bottlenecks persist among gas turbine manufacturers, demand for land-based power generation engines is also expected to continue increasing."

He also evaluated HD Hyundai Heavy Industries, which has secured a reference contract for data centers, as having "emerged as a genuine beneficiary." However, Yang pointed out, "As of last year, the engine division's production utilization rate has exceeded 100%, and with the need to secure ship engine slots for 2028-2029, additional capacity expansion is becoming necessary." He added, "If the engine division is expanded in the future, it is likely to be driven by confidence in sustained demand for land-based power generation engines."

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