Data Center Liquid Cooling Market

Data Center Liquid Cooling Market Outlook 2026 to 2033

The global data center liquid cooling market is witnessing a paradigm shift from niche engineering choice to strategic infrastructure priority. In 2026, the demand is estimated to surge at around USD 6.6 billion witnessing an annualised growth rate of 28.7% till 2027, with projections placing it north of USD 38.4 billion by the end of 2033. Liquid cooling is becoming the viable thermal strategy for next-generation data centres for those supporting AI training, high-performance computing and advanced cloud workloads. Modern AI silicon specifically the roadmap from NVIDIA, AMD, and custom hyperscaler ASICs has pushed thermal design power per chip well beyond the 1,000-watt threshold and are demanding liquid cooling systems.

AI model scaling, ESG mandates, water and energy cost pressures and government-backed digital infrastructure programs are driving the demand. Air cooling simply ceases to be physically or economically viable at rack densities exceeding 50–60 kW. North America dominates due to hyperscaler concentration, accelerated AI infrastructure spending and earlier adoption of direct-to-chip and immersion cooling architectures. Asia-Pacific is the fastest-growing region, driven by sovereign cloud investments, AI industrial policy in China, South Korea, Japan and India, and aggressive data center expansion in Southeast Asia as well.

Data Center Liquid Cooling Market Scenario & Strategic Insights

AI accelerators from players like NVIDIA and next-generation CPUs from Intel are pushing thermal envelopes beyond what air can dissipate reliably. In parallel, utilities are tightening grid access and local governments are scrutinizing data center water and energy usage more aggressively than ever.

The Trump Administration’s July 2025 Executive Orders, for “Accelerating Federal Permitting of Data Center Infrastructure,” is acting as a growth catalyst. U.S. has effectively removed the “red tape” brake on data center expansion, this policy shift is incentivizing operators to deploy high-density, liquid-cooled clusters faster than before, only restriction is the grid. As data centres are expected to account for more than 8% of the of global electricity by 2030, liquid cooling is an energy efficiency imperative.

Hyperscalers are vertically integrating liquid cooling supply chains, designing custom cold plates and securing fluoride-based fluid supplies directly. Enterprise & Colocation players are trying to introduce liquid cooling into air-designed facilities without risking catastrophic leakage or downtime, resulting in rising demand for modular liquid cooling units, self-contained loops that can be rolled to cool specific high-density racks without replumbing the entire building.

Attribute	2026	2033	CAGR (2026 – 2033)
Market Size	USD 6.6 Billion	USD 38.4 Billion	28.7%

Key Market Trends

1. AI-Driven Rack Density Is Redefining Cooling Architectures

AI workloads is rising at a breakneck speed, training large language models and running inference at scale requires dense GPU clusters with extreme thermal output. Hyperscalers such as, Microsoft and Google have publicly acknowledged that liquid cooling is now foundational to their AI data center designs. For instance, integration of AI into the cooling loop, new cooling distribution units (CDUs) are launching with onboard inference chips that predict thermal spikes based on compute workload scheduling. This predictive thermal management reduces pump energy usage by up to 20% compared to reactive systems.

• Immersion Cooling Is Moving from Pilot to Production

Single-phase and two-phase immersion cooling systems are now being deployed commercially especially in Asia-Pacific and edge data centres. Vendors are refining dielectric fluids, improving serviceability and demonstrating long-term reliability. The economics are compelling, higher server density, reduced footprint, and up to 40% lower cooling energy consumption in some deployments. Direct-to-Chip (D2C) cold plate technology is a path of least resistance, allowing operators to keep standard rack form factors while handling 100kW+ densities. Massive deployments where cold plates cool the GPU/CPU, while air still handles the rest of the board has been seen in the data center liquid cooling market.

• Sustainability and ESG Metrics are Forcing Cooling Innovation

Single-phase mineral oils are cheap and effective for immersion, the industry is eyeing two-phase cooling (where liquid boils to gas to remove heat) for extreme densities. Liquid cooling directly addresses two critical ESG challenges, energy efficiency and water usage. Compared to evaporative air-cooling systems, liquid cooling significantly reduce water consumption improving power usage effectiveness.

However, the European Union is tightening restrictions on PFAS, which are key components in many high-performance dielectric fluids (like Novec). A rush towards bio-synthetic dielectric fluids that offer 90% of the performance of fluorocarbons without regulatory risk. Companies like Cargill and Shell are pivoting aggressively here.

• Strategic Partnerships Across the Value Chain

The data center liquid cooling market is seeing increase in partnerships between server OEMs, cooling technology providers as well as data center operators. For instance, server manufacturers like Supermicro are increasingly offering liquid-cooling-ready platforms, tightly integrated with cooling infrastructure vendors. Also, owing to high Capex and technical complexity of liquid cooling,  hardware vendors are partnering with colocation providers to offer liquid-ready rows where the cooling infrastructure (CDUs, manifolds, fluid management) is leased rather than bought.

Segment & Category Analysis in Data Center Liquid Cooling Market

The market has been categorised based on cooling fluid type, product type, data centre type, cooling technique, end user, industry vertical and region

By Cooling Fluid Type

• Water-Glycol Based Cooling
• Dielectric Fluids
• Synthetic Hydrocarbon Fluids

Water-glycol based systems dominates with higher market shares as they leverage existing infrastructure, offer straightforward maintenance and work well in moderate-density environments up to 30-40 kW per rack. The fluid economics favored with lower upfront costs. Dielectric fluids captured significant share in high-performance computing and AI training facilities where thermal demands exceed what water-based systems can handle and is witnessing the fastest growth. These fluids allow direct contact with electronics, enabling rack densities. Demand is driven cooling capacity as well as the space efficiency that becomes material at scale.

By Product Type

• Cold Plates
• Cooling Plates
• Pumps & Pump Modules
• Heat Exchangers
• Chillers
• Cooling Distribution Units
• Others

Cold plates and cooling plates together represent the largest equipment spend as they are deployed at rack level, every high-density server requires dedicated thermal interface hardware, creating a volume play that scales directly with compute deployment. Recently the performance expectations has been shifted, hyperscalers are demanding cold plates that handle 1000W+ per processor, pushing manufacturers towards more sophisticated microchannel designs and exotic materials. Heat exchangers and chillers represent the facility-level infrastructure that determines overall system efficiency, and this is where operators focus their energy optimization efforts.

By Data Centre Type

• Hyperscale Data Centres
• Colocation Data Centres
• Enterprise Data Centres
• Edge Data Centres
• High Performance Computing (HPC) Centres
• Modular Data Centres

Hyperscale data centres is a primary adoption drivers for liquid cooling, facilities running AI training workloads or LLMs are hitting rack densities of 80-120 kW where air cooling becomes economically unviable. These operators make deployment decisions based on total cost of ownership over 10-year horizons, which favours higher upfront investment in liquid infrastructure. Colocation providers represent a more complex purchasing dynamic because they are balancing customer flexibility against infrastructure standardization. Leading players are now offering liquid-cooled cages as premium services, but they need cooling systems that can accommodate mixed deployments and varying customer lifecycles without stranding capacity. Enterprise data centres have been slower to adopt owing to their existing facilities built around air cooling and the capital required are high for new adoption.

By Cooling Technique

• Direct-to-Chip Liquid Cooling
• Single-Phase Immersion Cooling
• Two-Phase Immersion Cooling
• Rear-Door Heat Exchanger Cooling
• Indirect Liquid Cooling
• Hybrid Air-Liquid Cooling
• Others

Direct-to-chip currently dominates with significant market share and acts as the bridge technology that feels familiar to facility managers. It allows for high heat capture from the processor while maintaining a traditional data center.  Direct-to-chip cooling leads the market in terms of installed base, while immersion cooling represents the highest growth potential. Immersion cooling is finding a niche in Edge AI deployments, harsh, sealed tanks placed in cell towers or factory floors where dust and humidity would hamper air-cooled servers. Hybrid cooling architectures combining liquid and air are emerging as transitional solutions in brownfield facilities.

By End User

• Cloud Service Providers
• Hyperscalers
• Colocation Providers
• Telecom Operators
• Large Enterprises
• Government & Defense Agencies
• Others

Cloud service providers and large technology firms dominate demand, but government and defense sectors are emerging as high-value users due to sovereign AI and secure compute initiatives. Hyperscalers are witnessing substantial growth and are moving toward custom standards, effectively bypassing traditional OEM catalogues to build proprietary cooling chains. Colocation providers are the most stressed segment. They must support generic air-cooled racks next to high-density liquid-cooled racks for AI clients.

By Industry Vertical

• IT and Telecom
• BFSI
• Healthcare & Pharmaceuticals
• Media & Entertainment
• Automotive
• Aerospace & Defense
• Energy & Utilities
• Manufacturing & Industrial IoT
• Others

BFSI has emerged as a key vertical driven by data sovereignty requirements that force banks and insurers to maintain on-premise infrastructure for sensitive workloads. IT and telecom dominate spending because they are operating the hyperscale infrastructure and cloud platforms where liquid cooling delivers the clearest ROI, these companies are building facilities purpose-designed for GPU clusters and high-density compute. Healthcare and pharmaceuticals is fastly adopting especially around genomics research and drug discovery simulations.

Key Regional Analysis

Region	Market Share (2025)	Key Market Highlight
North America	46%	Domination due to concentration of hyperscalers, advanced semiconductor ecosystems, and early AI adoption
Europe	19%	Liquid cooling is seen as essential for meeting EU climate targets while supporting digital growth
Asia-Pacific	28%	Government-backed digitalization programs and rising cloud penetration are bolstering the demand
Rest of the World	7%	There is rise in investments in Mexico

North America is the prominent region with, the U.S. data center liquid cooling market benefits from favorable capital access, deep technical expertise and policy support for digital infrastructure. The recent energy policies have reinvigorated the U.S. market in power-dense hubs like Northern Virginia and newer, deregulated zones in the Midwest.

Asia-Pacific is the fastest-growing region, driven by aggressive data center expansion in China, India, Singapore, and Japan. Asia-Pacific although lacking the massive legacy infrastructure of the U.S., countries like Singapore and Malaysia are pioneering greenfield immersion data centres. Demand in Europe is regulated by strict environmental directives regarding fluid toxicity (PFAS) and heat reuse. Europe is leading the world in heat recovery mandating that liquid cooling loops plug into district heating systems.

Market Growth Drivers and Opportunities

• AI compute explosion boosting the demand

Rapid acceleration of AI workloads has fundamentally altered the demand, training large language models, running real-time inference, supporting AI-driven analytics, etc. requires GPU. Accelerator-dense racks routinely exceeding 40 to 80 kW, a level where traditional air cooling becomes technically inefficient. Advanced accelerators from companies like NVIDIA and next-generation CPUs optimized for AI are designed to operate at peak performance within narrow thermal tolerances.

The AI compute explosion is also reshaping data center economics, operators attempting to run AI workloads on air-cooled infrastructure face higher failure rates, hardware degradation, sharply rising the operating costs driven by inefficient power usage effectiveness. Liquid cooling, like direct-to-chip and immersion architectures, has emerged as the scalable solution capable of sustaining these performance levels without excessive energy waste.

• Retrofitting existing data centres creating new demands

New opportunities in the data center liquid cooling market lies in the retrofitting of existing air-cooled facilities. The global data center footprint is significant and a key portion of installed capacity was designed for rack densities below 10 kW. Rather than abandoning these assets, operators are adopting hybrid cooling models, integrating liquid cooling at the rack while maintaining air cooling elsewhere. This approach allows datacenters to support AI and HPC workloads.

Colocation providers, for example, are using liquid-cooled AI-ready zones as a premium offering, attracting hyperscale and enterprise customers who need immediate access to high-density compute. These incremental upgrades extend asset life, improve revenue per square foot and provide a clear migration path toward more liquid-centric architectures over time.

Growth Restraining Factors and Challenges

• High initial capital investment restricting growth

Liquid cooling adoption is constrained by high upfront capital expenditure. Compared to conventional air cooling, liquid cooling systems require investment in specialized infrastructure including cold plates, manifolds, pumps, heat exchangers and in some cases immersion tanks and dielectric fluids. For smaller enterprises with limited capital, these initial costs are difficult in time when AI workloads represent only a portion of their overall compute demand.

Many operators remain cautious, concerned about vendor lock-in or future compatibility as liquid cooling technologies continue to evolve. While hyperscalers can absorb these risks and costs at scale, mid-sized data center operators are delaying adoption until ROI is more clear, as 95% of pilot projects being failed to generate ROI regarding the AI-integration as per MIT study.

• Operational complexity and skills gap are a key challenge

Operating liquid-cooled data center introduces technical and organizational complexity that many operators are still learning to manage. Unlike air-cooled environments, liquid cooling requires expertise in fluid dynamics, materials compatibility, leak detection and preventive maintenance of pumps and seals. Even minor operational errors, such as, improper fluid handling or inadequate monitoring can lead to downtime risks that traditional facilities are not accustomed to. Experienced engineers and technicians with hands-on liquid cooling expertise are in short supply in emerging markets where data center expansion is quick. As a result, operators must invest heavily in training, vendor support, and new operational processes.

Competitive Landscape 

The competitive landscape is consolidating, established thermal management firms, server OEMs and specialized liquid cooling startups are all competing for share. The data center liquid cooling market is witnessing increased M&A activity, strategic investments, joint development agreements aimed at delivering integrated solutions. Hyperscalers are also exerting influence by setting de facto standards through their procurement requirements, effectively shaping the direction of technology development across the ecosystem.

The giants like Vertiv, Schneider Electric, Eaton and others are using their balance sheets to acquire technology and offer end-to-end solutions. Companies like Submer, LiquidStack and Green Revolution Cooling are pushing immersion cooling boundaries. Whereby, NVIDIA and Intel are now kingmakers, by certifying specific cooling vendors for their reference designs, they effectively pick the winners and losers in the market.

Some of the key players are

• Asetek Inc. A/S
• CoolIT Systems
• Submer
• Asperitas
• Iceotope
• LiquidStack
• Green Revolution Cooling Inc.
• Schneider Electric
• Vertiv Group Corp.
• Rittal GmbH & Co. KG
• STULZ GMBH
• Eaton
• Hewlett Packard Enterprise
• Alfa Laval
• Lenovo
• DCX Liquid Cooling Systems
• Huawei
• Fujitsu
• Delta Electronics
• Airedale / Modine

Key Developments:

• In December 2024, Blackstone’s acquired of AirTrunk which indicates that private equity sees liquid-ready, high-density infrastructure as a core asset class. The deal value was worth USD 16 billion.
• In March 2024, Vertiv became a primary partner for NVIDIA’s GB200 NVL72 systems, co-engineering the cooling loop to ensure the optics and copper interconnects remain thermally stable.
• In December 2024, Coolit System expanded its capacity to meet the growing demand from key end users adapting AI systems.
• In November 2025, Daikin announced acquisition of Chilldyne, leader in negative pressure liquid cooling systems for high-performance and AI data centers.

Frequently Asked Questions (FAQs) 

1. How is data center liquid cooling market performing at global level?

Data center liquid cooling market is estimated to worth around USD 5.1 billion in 2025 and is projected to reach around USD 38.4 billion by 2033. The market is further projected to grow with 28.7% annualised rates in between the forecast period.

2. Will air cooling completely disappear?

Air cooling will remain sufficient for storage servers, networking gear, standard enterprise workloads and will not disappear. The data center liquid cooling market is moving toward hybrid data centres where high-density liquid rows coexist with traditional air-cooled rows.

3. How does the U.S. Administration stance impact this market?

Since AI race is intensifying, deregulation of energy infrastructure and permitting accelerates the construction of the massive power plants needed to run AI clusters. This creates a downstream demand for liquid cooling, as these new facilities are almost exclusively being designed for high-density AI workloads.

4. Is immersion cooling better than direct-to-chip?

Immersion offers better thermal stability and potential for higher densities. However, operationally it is disruptive servicing a server involves cranes and oil drips. Direct-to-chip is winning currently because it fits existing operational workflows (racks, slide-out servers) better.

5. What is the risk of fluid leakage?

While water in the server is the fear, modern systems use negative pressure (vacuum) loops. If a line is cut, air is sucked in, rather than fluid spraying out.

6. Can old data centres be retrofitted for liquid cooling?

Yes, but it is expensive. The floor loading (weight of fluid) and plumbing requirements are key challenges. Solutions like rear door heat exchangers (RDHx) or closed-loop immersion tanks are often used as spot cooling fixes in these buildings.

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