Synthetic diamonds, once dismissed as a consumer jewelry fad, are being revalued as a critical AI chip thermal management material.
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Diamond thermal materials surge 87% as NVIDIA adopts AI chip cooling
Synthetic diamonds, once dismissed as a consumer jewelry fad, are being revalued as a critical AI chip thermal management material.
Synthetic diamond stocks surged 87% this year as the material's thermal conductivity — 4 times that of copper — positions it as a solution for AI chips hitting power-density limits above 150W per square centimeter.
"The combination of diamond materials and AI computing power is an important path to break through the performance bottleneck of high-end chips," Zhu Yanhui, chief executive of Chaoying Diamond, said after meeting with Nvidia CEO Jensen Huang during his 2026 China visit.
Diamond's natural thermal conductivity of 2,000 to 2,500 W/(m·K) far exceeds copper at roughly 400 W/(m·K) and aluminum at about 250 W/(m·K). Its thermal expansion coefficient of 1.0 to 1.5 x 10⁻⁶ per Kelvin closely matches silicon and silicon carbide, preventing interface delamination after thousands of thermal cycles. Nvidia said in February its next-generation GPU will adopt a diamond composite plus liquid cooling solution, and Chaoying Diamond's diamond-copper composite has passed the company's supply chain verification.
HuaAn Securities projects the global diamond thermal management market could reach 97 billion yuan ($13.4 billion) by 2032 in a conservative scenario, or as much as 974 billion yuan in an optimistic case. Chinese producers control 63% of global synthetic diamond rough capacity at 25.2 million carats, giving them a structural supply advantage as demand shifts from jewelry to chip cooling.
AI Chips Hit a Thermal Wall
The core problem driving this shift is straightforward: the more powerful AI chips become, the more heat they generate. Semiconductor failure rates rise 2 to 3 times for every 18 degrees Celsius increase in operating temperature, according to HuaAn Securities. In high-performance computing scenarios, chip heat flux density has reached 150W per square centimeter, with airborne radar applications exceeding 10¹⁰ W per square centimeter. Traditional cooling methods — air cooling, then liquid cooling, then vapor chambers — are approaching physical limits. Diamond offers a step-change improvement because it conducts heat 5 times faster than copper and 10 times faster than silicon.
China's Producers Race to Scale
Chinese synthetic diamond companies are moving quickly to capture the opportunity. HuangHeXuanFeng put into operation the country's first 8-inch diamond heat sink production line in February, with an annual capacity of 20,000 pieces. SiFangDa said its diamond heat sinks have passed overseas customer testing and entered small-batch supply, with a new factory planned for completion by the end of next year. LiLiang Diamond said it can "clearly feel" downstream demand continuously increasing, with multiple domestic semiconductor companies actively pursuing sample delivery and testing. ZhongBingHongJian has achieved small-batch production of diamond heat sinks, while HuiFeng Diamond is building a full industrial chain covering high-thermal-conductivity diamond single crystals, powders and metal composites.
The revaluation is happening faster than the revenue. SiFangDa and LiLiang Diamond trade at 179 times and 157 times trailing earnings respectively as of May 25, reflecting market expectations of a multiyear demand cycle rather than current profitability. Nvidia, which commands 75.9% of the AI server GPU market per TrendForce, is the demand anchor — but the technology remains in a developmental stage, with 18 to 24 months typically required from lab to mass production. For investors, the question is whether diamond thermal materials follow the same trajectory as liquid cooling, which lifted related stocks more than 300% in 2023 when Nvidia GPU power consumption exceeded 700 watts.
This article is for informational purposes only and does not constitute investment advice.
