AVC (3017.TW): Liquid cooling rising adoption along with new AI servers across GPU and ASIC to drive sequential monthly revenues growth; Buy

We expect AVC's monthly revenues to continue sequential growth through Dec 2026, leading 3Q26 / 4Q26 revenues to grow, driven by (1) new AI server racks ramp up, driving overall liquid cooling penetration rate; (2) its major ASIC AI server customer's new model ramp up, driving its air-cooling and liquid-cooling components, along with a rising liquid cooling penetration rate; (3) its customer base expansion to a new ASIC AI server, to further drive its liquid cooling components in 4Q26; and (4) increasing adoption rate of ultra-thin VC in consumer electronics to fit the lightweight design and major customer's foldable phone model. We expect AVC's net income to grow at a strong CAGR in 2026-28E, riding on the strong AI spending, a growing liquid cooling penetration rate, and AVC's leading market position in total solutions (air cooling, liquid cooling with various components / systems). Maintain Buy. Key downside risks include slower-than-expected adoption of liquid cooling, lower-than-e