China's $295B AI data center plan to boost battery demand 125GWh

China's plan to invest about $295 billion in artificial intelligence data centers over five years could generate 125 gigawatt-hours of incremental energy storage battery demand, CLSA said, a boost for the sector.

"This will provide a strong catalyst for China's battery concept stocks, and the recent share price pullback presents a buying opportunity," the brokerage said in a research report.

The 125GWh estimate represents about one-quarter of CLSA's forecast for China's energy storage demand this year. The broker named Contemporary Amperex Technology Co. Ltd. as its top pick, followed by SIGENERGY, CALB, REPT BATTERO and GOTION HIGH-TECH.

CATL, the world's largest battery maker, trades on both the Shenzhen and Hong Kong exchanges. CLSA rates the stock Outperform with price targets of RMB570 on the A-share and HKD820 on the H-share. The other four picks also carry Outperform ratings with targets ranging from HKD22 for REPT BATTERO to HKD608 for SIGENERGY.

The $295 billion plan, reported by Bloomberg News, involves key government agencies including the National Development and Reform Commission building data centers across the country over the next five years. The investment supports Beijing's ambition to surpass the US in AI infrastructure, a race that has driven record capital spending by American tech giants including Microsoft, Amazon and Google.

For battery makers, the AIDC buildout represents a new demand vertical beyond electric vehicles. Energy storage systems are critical for data centers to ensure uninterrupted power supply and manage peak loads, particularly as AI workloads require massive and consistent energy consumption. A single large data center can consume as much electricity as a small city, making backup storage a necessity for operators.

CATL, which already supplies batteries to major data center operators, is best positioned to capture this demand given its scale and cost advantages in LFP chemistry. The company's energy storage battery business has been a growing revenue source alongside its dominant EV battery franchise, where it holds more than 35 percent of the global market. SIGENERGY and CALB, the next two picks, have also been expanding their energy storage offerings to compete in the data center segment.

For investors, the AIDC-driven storage demand adds a structural growth leg to China's battery sector at a time when EV battery demand growth is moderating. CLSA's call suggests the market may be underestimating the scale of this opportunity, with the recent pullback offering entry points into names that could see earnings upgrades as the buildout accelerates. CATL shares have rallied in recent sessions, extending gains to six days, though BNP Paribas recently downgraded the stock to Neutral, citing excessive premium between its H-shares and A-shares.

This article is for informational purposes only and does not constitute investment advice.