Data Centers Floating at Sea... Time to Buy Shipbuilding Stocks Now [Weekend Money]

"FDC Market Set to Take Off Sooner"
Korea Investment & Securities: Three Shipbuilders to Benefit

South Korea's three major shipbuilders—Samsung Heavy Industries, Hanwha Ocean, and HD Hyundai Heavy Industries—are expected to benefit as the market for floating data centers (FDCs), which operate on the water, is expected to take off sooner than anticipated.

Kang Kyung-tae, an analyst at Korea Investment & Securities, made the remarks in a recent report titled "Buy Call on the Floating Data Center Value Chain," saying, "We believe the FDC market will take off sooner than expected." Kang noted that FDCs are being considered as an alternative as permitting risks for land-based data centers have come to the fore following the U.S. midterm elections. He said that, while FDCs would still have to comply with a separate regulatory framework, the issues involved differ from those affecting residents who vote in the midterm elections, and are easier to resolve than those facing land-based facilities.

A Data Centre World exhibition booth featuring a model of Samsung Heavy Industries' FDC. Samsung Heavy Industries

He said Samsung Heavy Industries' signing of the definitive contract for Project Zeus would be an important event in opening up the FDC market. Samsung Heavy Industries is expected to sign a definitive engineering, procurement and construction (EPC) contract with U.S. data center developer Mustarian for two 50-megawatt FDCs in the fourth quarter of this year. Kang said this "means the relevant permitting requirements have effectively been resolved," adding that "if the definitive contract is signed, it will lay the foundation for the global FDC market, going beyond the significance of a single project."

Kang stressed that FDCs are more cost-effective than land-based data centers in terms of project costs and operating expenses (OPEX), and that investors should proactively buy into the FDC value chain, centered on the three shipbuilders. "Just as Korean shipbuilders dominated the drillship construction market in 2010, when demand for deepwater oilfield development rose amid high oil prices, they have the potential to emerge as key suppliers in the FDC market," he said. He added that he maintains HD Hyundai Heavy Industries, which has a monetization model for its power generation vessels (BMPP), as his top pick in the sector.

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