Aircon stocks soar on record heat and data centre demand

{"text":[[{"start":8.3,"text":"Investors have been piling into stocks of air conditioning companies, as climate change delivers one sweltering heatwave after another and the spread of vast data centres drives demand for industrial cooling systems."}],[{"start":21.35,"text":"New York-listed Carrier Global, which makes most of its revenues from residential air conditioning, has added a third to its market value since the start of the year, taking it to $60bn. "}],[{"start":33.45,"text":"Madison Air Solutions — which makes custom heating, ventilation and air conditioning (HVAC) systems for homes, hospitals, offices and agricultural and industrial settings and owns brands such as Big Ass Fans — has climbed 41 per cent since its public float was priced in April. "}],[{"start":53.1,"text":"Other companies that manufacture, sell and maintain HVAC systems have also surged this year amid warnings from climate scientists that temperature extremes are set to become more routine. "}],[{"start":65.3,"text":"“Investors are consciously thinking about [climate change],” said Brett Linzey, electrical equipment and multi-industry analyst at Mizuho. He said growth in the global HVAC market would be driven by global warming, stricter energy efficiency regulations and urbanisation in emerging markets."}],[{"start":83.05,"text":"The years 2023 to 2025 were the three hottest on record, with 2024 setting the highest global average surface temperature, at 1.55C above the pre-industrial baseline. This is distinct from the 1.5C threshold set under the UN Paris agreement which is measured over a period of two decades."}],[{"start":104.15,"text":"The UN’s World Meteorological Organization warned last month, however, that there was an 86 per cent chance that one year between 2026 and 2030 would exceed the 2024 record."}],[{"start":117.25,"text":"Shares in Tokyo-listed Daikin Industries, the world’s largest HVAC systems manufacturer, are up 17 per cent this year, while the AdvisorShares HVAC and Industrials exchange traded fund is up 33 per cent.  "}],[{"start":133.25,"text":"“Extreme heat events are accelerating what was already a structural replacement cycle — ageing equipment that was ‘good enough’ in a milder climate suddenly becomes inadequate when temperatures consistently exceed design thresholds,” Linzey added."}],[{"start":148.15,"text":"Multiple red heat alerts were issued across Europe this week, with Paris reaching 40.9C and parts of the UK forecast to peak at 37C after reaching a provisional record of 36C on Wednesday. This follows the shattering of heat records in May across the continent. "}],[{"start":169.15,"text":"Fridges and freezers in supermarkets in the south of England have reportedly broken down during recent heatwaves amid warnings that older equipment is not fit for purpose. Some schools have been forced to close while others have only been kept open thanks to air conditioning units bought by pupils’ parents."}],[{"start":186.35,"text":"“Air conditioning penetration in Europe is generally significantly lower than the US, but I think that could be . . . an increasingly good market opportunity for these HVAC companies,” said Amit Mehrotra, managing director and industrials sector head at UBS. “The direction of travel is probably increased AC penetration in Europe.”"}],[{"start":207.85,"text":"For the year to March 31, Daikin’s European air conditioning and refrigeration sales grew by almost 10 per cent, faster than any other region. In part, the company attributed this to residential growth in a market where “air conditioner penetration levels had typically been low” and on the commercial side to “a growing environmental awareness”."}],[{"start":230,"text":"Commercial HVAC companies, boosted by the data centre build-out and office retrofitting to meet energy efficiency requirements, have outperformed those weighted towards residential cooling that depend on consumer demand. "}],[{"start":243.1,"text":"“There is an affordability challenge that consumers have in buying these pieces of equipment, [which] could cost $10,000 to $20,000 . . . it’s not easy for somebody to write that type of cheque,” Mehrotra said."}],[{"start":255.95,"text":"He said consumers could be priced out of air conditioning due to rising costs since the Covid-19 pandemic, driven by the data centre build-out."}],[{"start":264.84999999999997,"text":"Rising global electricity prices have also increased demand for newer, more efficient cooling systems. "}],[{"start":270.95,"text":"Shares in HVAC, piping and plumbing installation company Comfort Systems USA — which is increasingly viewed as an AI winner due to its work as a data centre contractor — have more than doubled this year, with the company’s market value rising to almost $73bn. "}],[{"start":288.09999999999997,"text":"Julian Mitchell, an equity analyst at Barclays, said that climate change had come up “somewhat as a topic of conversation” with investors, although data centres had been “far more important” for HVAC equities on the commercial side."}],[{"start":301.95,"text":"“The residential AC stocks are more sensitive to weather conditions, [whereas] the main driver of the non-residential HVAC names is the data centre market,” he said. "}],[{"start":311.84999999999997,"text":"Oklahoma-headquartered commercial HVAC and liquid cooling provider AAON — which has a market value of $11.1bn — has risen 70 per cent this year. Another provider, Johnson Controls — which sold its residential and small commercial HVAC unit to Bosch last August — has increasingly pivoted to serving AI data centres and is up 18 per cent this year."}],[{"start":null,"text":"

"}],[{"start":null,"text":""}],[{"start":334.59999999999997,"text":"Where climate change meets business, markets and politics. Explore the FT’s coverage here."}],[{"start":340.49999999999994,"text":"Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here"}],[{"start":354.6499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1782366280_3474.mp3"}