Kaiyuan Securities has expressed optimism regarding diamond equipment enterprises that possess core self-research and development capabilities and have made significant strides in the localization of high-end equipment. The shift in investment focus within the synthetic diamond industry is moving away from traditional cyclical drivers toward growth driven by artificial intelligence (AI) computing power, according to a recent research report from Open Source Securities.
Companies involved in diamond materials, applications, and processing equipment are expected to capitalize on the industrialization opportunities arising in two key areas: diamond heat dissipation and diamond drill bits. Midstream enterprises with product portfolios tailored for high-end applications, particularly in diamond heat dissipation and drill bits, are likely to gain the most. These companies, especially those with extensive technological expertise and the ability to integrate into the AI supply chain, stand to benefit significantly as the penetration rate of high-end applications increases.
Open Source Securities highlights that the demand for advanced materials is escalating due to the constraints imposed by existing heat dissipation systems in the AI computing revolution. Traditional systems are nearing their physical limits, unable to effectively manage the increasing power density of AI chips. Synthetic diamonds, with their exceptional thermal conductivity of up to 2200W/m·K, ultra-high hardness, and material stability, are being recognized as a critical solution for thermal management in computing systems and high-end manufacturing.
Industrialization efforts are gaining momentum, with the first servers equipped with diamond heat dissipation technology completing commercial delivery in February 2026. Simultaneously, China’s first 8-inch diamond heat sink production line has been established, marking a significant milestone in the transition toward diamond applications for the AI sector. Analysts predict that 2026 could be a pivotal year, representing a 0-1 industrialization inflection point for diamond applications, urging a reevaluation of the industry’s value.
Diamond heat dissipation solutions are becoming increasingly vital as AI chip power consumption continues to rise. The power density of single GPUs has surpassed 2000W, while hotspot heat flux density has exceeded 1000W/cm². In this context, diamond is anticipated to be the “ultimate” thermal solution for the high-computing power era, capable of enhancing thermal management through three main applications: as diamond substrates, heat sinks, or via microchannel cooling systems integrated into diamond structures. A notable development occurred on February 23, 2026, when Akash Systems delivered the world’s first NVIDIA H200 GPU servers utilizing GaN-on-Diamond heat dissipation technology, marking the transition of diamond solutions from technical validation to commercial deployment.
On another front, the need for diamond drill bits is being amplified due to the ongoing upgrades in the printed circuit board (PCB) industry. As AI computing evolves, the PCB sector is transitioning from simple layer count increases to more sophisticated material system upgrades, particularly with M9-grade materials. The lifespan of traditional tungsten steel drill bits has diminished drastically, making polycrystalline diamond (PCD) drill bits an attractive alternative. PCD drill bits offer exceptional hardness and wear resistance, significantly extending their lifespans on advanced M9-grade materials compared to traditional solutions. This shift underscores the growing necessity for diamond drill bits, transitioning them from optional tools to essential processing instruments within advanced PCB manufacturing.
Among the companies likely to benefit from these developments are Sinomach Precision, World Diamond, Sific, Yellow River Whirlwind, Power Diamond, Huifeng Diamond, Norinco Red Arrow, and Innov Laser. However, risks persist, including intensified competition, slower-than-expected technological advancements, and the potential for industrialization to fall short of projections.
The diamond industry appears poised for a transformative period as it aligns itself with the imperatives of the AI landscape, suggesting that the integration of diamond materials in both computing hardware and manufacturing processes may redefine operational efficiencies across various sectors.
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