As the engines that used to power large ships emerge as a new electricity source for data centers, HD Hyundai Group is absorbing the benefits of investment in artificial intelligence (AI) data centers across the board. With a business structure that broadly spans power generation (engines), infrastructure (transformers and power distribution), and installation, operation, and maintenance (solutions), HD Hyundai is being reappraised as a flagship group encompassing the data center value chain.
HD Hyundai Group's businesses are largely divided into three areas: shipbuilding and offshore (HD Korea Shipbuilding & Offshore Engineering, HD Hyundai Heavy Industries, HD Hyundai Samho), energy (HD Hyundai Oilbank, HD Hyundai Electric, HD Hyundai Energy Solutions), and machinery and robotics (HD Hyundai XiteSolution, HD Construction Equipment, HD Hyundai Robotics). In the past, they were viewed as separate businesses with different industry cycles, but they are evolving into a structure where the three areas generate organic synergies centered on AI data centers.
Thanks to the rise of ship engines as a power source for "electricity-guzzling" data centers that run 24/7, seven days a week. As data centers surge, ship engines are drawing attention as an alternative amid a shortage of gas turbines, the traditional power source.
In the stock market, HD Hyundai Group shares are being revalued as core data center plays. The catalyst was a large order worth 627.1 billion won that HD Hyundai Heavy Industries released. Shares jumped after word spread that the company had signed a contract to supply engines to a U.S. energy infrastructure developer. On news that ship engines could become a power source to run server rooms, related stocks such as Samsung Heavy Industries and Hanwha Engine also climbed.
HD Hyundai Marine Solution, a ship and engine MRO (maintenance, repair and operations) company, said at a recent investor relations (IR) meeting to report results that it had received initial inquiries about "floating data centers (FDCs)" using secondhand ships or barges. It said the idea is still in the early stages of development, but the securities industry projected that related MRO demand could materialize within three years.
The company said, "FDCs are still in the early stages, but market interest has been confirmed." HD Hyundai Marine Solution believes technical constraints for FDCs are not significant, thanks to its accumulated experience retrofitting LNG FSRUs (floating storage and regasification units) and FSUs (floating storage units).
Bae Gi-yeon, an analyst at Meritz Securities, said, "As the FDC idea using secondhand ships or barges is developed, HD Hyundai Marine Solution's retrofit capabilities can be applied," adding, "a favorable breeze for data centers is blowing through the shipbuilding industry."
HD Hyundai Electric, which manufactures power and distribution equipment, is an affiliate directly benefiting from the surge in data centers. Three years ago, HD Hyundai Electric's annual revenue was about 2.7 trillion won and operating profit was about 300 billion won, but last year revenue jumped to 4 trillion won and operating profit to about 1 trillion won.
HD Construction Equipment, which appears unrelated to data centers, also secured related work. HD Construction Equipment plans to start up a new engine plant in Gunsan, North Jeolla, in the second half of this year, and the plant is said to produce extra-large engines for AI data centers.
As all business areas have been aligned with AI data center operations, HD Hyundai Group's market capitalization recently topped 200 trillion won. It is the first time since the group was split off in 2002. There is also an assessment that HD Hyundai's key affiliates are transitioning from traditional manufacturing corporations to infrastructure platform companies.
Son Hyun-jung, an analyst at Yuanta Securities Korea, said, "HD Hyundai Group is pursuing a pinpoint strategy targeting data centers," analyzing that "as engine-based on-site power generation emerges as a practical alternative to the shortage of gas turbine supply, the benefits that began with generators will extend to a package of power equipment."
However, because many group affiliates have seen share prices surge on data center benefits, investors should note that the group's stock prices could all be affected at once by the issue. Many worry that the pace of data center expansion could be adjusted depending on the global economy and big tech's investment cycle. Some also raise concerns about overinvestment in data centers.
A securities industry official said, "HD Hyundai has a business structure suited to the era of data centers, but given that the stock price has risen sharply on the issue recently, we need to see whether actual order growth and profitability improvements follow."