Jefferies Identifies Indonesian Materials Stocks Set to Gain from AI Data Center Boom

The rapid buildout of artificial intelligence infrastructure could create significant opportunities for select Indonesian materials companies, according to a new analysis from Jefferies. The firm notes that the unique power and cooling demands of AI data centers are poised to drive demand for specific industrial goods, though it cautioned that recent investor enthusiasm for some related stocks may be premature.

The AI Infrastructure Demand

AI data centers require a fundamental shift in infrastructure compared to traditional facilities. Jefferies highlights that AI server racks can consume up to 20 times more power than conventional racks, with some configurations demanding 200 kilowatts versus the typical 10 kilowatts. As a reference, Nvidia’s Blackwell GB200 NVL72 system operates at 120 kilowatts.

This immense power consumption generates extreme heat, rendering conventional air cooling insufficient. Instead, AI facilities rely on advanced liquid cooling systems, including direct-to-chip cooling that uses a network of pipes and hoses. This creates a potential bottleneck and a demand surge for components like water pipes, which could benefit materials suppliers.

Stock-Specific Opportunities and Risks

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Jefferies identified several companies that could be impacted by this trend, while also flagging some whose recent performance appears disconnected from fundamentals.

• Potential Beneficiaries:
• AVIA: Approximately 20% of the company's revenue comes from goods distribution, primarily water pipes. While this is a lower-margin business than its core decorative paint segment, increased demand could boost top-line growth.
• ISSP: The company produces steel pipes already used in data center racks and structures. However, Jefferies noted the stock's low turnover could pose a challenge for investors.
• KIJA: Through its subsidiary Bekasi Power, the company owns a 130-megawatt gas-fired power plant that could benefit from rising electricity demand. The plant's power purchase agreement with state utility PLN is set to expire in 2032.
• Overheated Rallies:
• DMAS and BEST: Jefferies views the recent rallies in these industrial estate stocks as "overdone." The stocks gained 24% to 36% over one month, far outpacing the 5% rise in the Jakarta Composite Index. The firm argues these companies face land constraints and have a limited ability to capture recurring revenue from the increased power and water consumption.

Market Context

The analysis comes as Indonesia braces for significant growth in its digital infrastructure. Citing a meeting with the Nusantara Data Centre Academy, Jefferies reported that Indonesia’s data center pipeline capacity is projected to quadruple by 2030, reaching 2 gigawatts. This expansion underpins the long-term thesis for companies supplying the essential power and materials for this buildout.