Liquid Cooling Market Surge, $29.2 B by 2033, 66, 000 NVIDIA GPUs for Nscale, and Vertiv $9.5 B Backlog (2025 to 2026)

Industry Risks: AI-Driven Liquid Cooling Demand Creates Infrastructure Bottlenecks

The surge in bidding activity for specialized components like those from Perma-Pipe signals a structural market shift where liquid cooling is no longer an optional efficiency upgrade but a mandatory enabling technology for deploying next-generation Artificial Intelligence (AI) hardware. Between 2021 and 2024, liquid cooling was a niche solution for high-performance computing (HPC). Since January 2025, the commercialization of GPUs like NVIDIA’s Blackwell platform, which pushes rack densities past 100 k W, has created a non-discretionary investment cycle, straining the entire supply chain for pipes, pumps, and coolant distribution units (CDUs).

• In the prior period (2021-2024), average rack densities were 5-15 k W, well within the capabilities of traditional air cooling. Today, AI workloads regularly exceed 50 k W per rack, with NVIDIA Blackwell deployments projected to reach 120-150 k W, making air cooling technically and economically unviable.
• The market has responded with rapid investment, projected to grow from $5.7 billion in 2026 to $29.2 billion by 2033. This demand shock is the primary driver behind project delays, with over half of global data center projects facing setbacks in 2025 due to component and power infrastructure shortages.
• Hyperscalers are now forced to secure their supply chains directly. Microsoft, for example, is a key partner for neocloud provider Nscale, which is deploying 66, 000 NVIDIA Rubin GPUs requiring direct-to-chip liquid cooling. This contrasts with the earlier period, where cooling was a standard part of general contractor procurement.
• Heat is now the primary bottleneck for data center scaling. This has elevated component suppliers from commodity providers to critical partners, evidenced by Vertiv’s $9.5 billion order backlog, which signals a multi-year demand runway for its thermal management systems.

Investment Analysis: $863 M in Strategic Deals Signal Cooling Technology Consolidation

Corporate and venture investment is no longer focused on validating the need for liquid cooling but on acquiring specialized technologies to solve specific deployment challenges and secure a position in the consolidating supply chain. Since January 2025, strategic acquisitions and funding rounds have targeted companies with proven two-phase, direct-to-chip, or modular cooling solutions, a shift from the earlier period’s focus on broad-based R&D.

• Blackstone’s strategic investment in Advanced Cooling Technologies (ACT) in March 2026 was not a venture play but a move to secure access to thermal management technology critical for its extensive data center portfolio, recognizing that cooling is a primary constraint on growth.
• In December 2025, Trane Technologies acquired Stellar Energy Digital to directly integrate modular data center cooling solutions into its portfolio, aiming to reduce on-site construction complexity and speed up deployment timelines for its clients.
• Carrier’s investment in Zuta Core in February 2025 shows a focus on differentiated technology. Zuta Core’s waterless, two-phase direct-to-chip cooling offers a compelling alternative for retrofits and space-constrained environments, addressing a key market segment.
• Venture capital is also targeting specific niches, seen in Iceotope Group’s $26 million Series B funding. This investment, with participation from Barclays Climate Ventures, focuses on precision liquid cooling, highlighting the demand for solutions that can be deployed at the edge and in non-traditional data center environments.

Table: Strategic Investments and Acquisitions in Data Center Cooling (2025-2026)

Geography: US Power Grid Strain Forces Data Center Expansion into New Territories

While North America remains the dominant market for data center liquid cooling, accounting for a 46% share in 2025, severe power grid constraints and regulatory hurdles in established hubs are forcing development into new regions and creating systemic project delays. The primary criterion for site selection has shifted from connectivity to “speed to power, ” fundamentally altering the geographic expansion of AI infrastructure compared to the 2021-2024 period, which saw a concentration in existing data center alleys.

• In the U.S., a staggering 7 GW of planned AI data center capacity for 2026 has been canceled or delayed, primarily due to the inability to secure power. The PJM Interconnection, a major grid operator, has seen its new-build queues overwhelmed, adding an estimated $16.6 billion in capacity costs.
• Established markets are facing new regulatory opposition. In March 2025, Loudoun County, Virginia, the world’s largest data center market, amended its zoning ordinance to create new development hurdles, signaling a growing risk for investors in historically favorable locations.
• This has created an opportunity for other regions. Portugal is emerging as a new hub, exemplified by Nscale’s €695 M investment in a neocloud AI infrastructure project, with Microsoft as a key partner. This move is driven by the availability of power and a more favorable development environment.
• Waste heat recovery is becoming a critical regulatory driver, particularly in Europe. Germany’s new data center strategy mandates targets for energy efficiency and waste heat reuse, which inherently favors liquid cooling systems that capture high-grade heat suitable for district heating.

Technology Maturity: Direct-to-Chip Cooling Achieves Commercial Scale, Outpacing Immersion

Direct-to-chip (DTC) liquid cooling has solidified its position as the dominant, commercially mature technology for immediate, at-scale deployment, while full immersion cooling remains a fast-growing but more futuristic solution requiring greenfield construction. Between 2021 and 2024, DTC and immersion were often discussed as interchangeable future options. Since 2025, the urgent need to cool high-density retrofits and new builds has led to DTC’s clear market leadership due to its practicality and proven performance.

• Direct-to-Chip (DTC) held a dominant 47% market share as of 2025. Its ability to be integrated into existing rack and data hall designs makes it the default choice for upgrading facilities to handle AI workloads, as it can remove 60-80% of server heat via liquid without a complete infrastructure overhaul.
• Specialized AI cloud providers like Core Weave have standardized on closed-loop, direct-to-chip systems for their NVIDIA Blackwell deployments, validating DTC as the go-to solution for operating the most demanding AI hardware at scale.
• The sub-market for DTC components is expanding rapidly. The market for CDUs, the interface between the facility water and the server, was valued at $1.50 billion in 2025 and is projected to grow at a 20.70% CAGR, reflecting DTC’s infrastructure requirements.
• Immersion cooling, while offering superior thermal performance, held a smaller 30% market share in 2025. Its adoption is projected to grow at a robust 24% CAGR but is primarily limited to new, purpose-built facilities due to the significant changes required for server hardware and data hall infrastructure.

Table: SWOT Analysis for Data Center Liquid Cooling

Scenario Modeling: Modular Cooling Designs will Dictate Deployment Speed in 2026

If the current constraints on power infrastructure and component supply chains persist through 2026, the ability to deploy AI data centers will be determined less by securing GPUs and more by the availability of modular, prefabricated cooling and power systems. Companies that can deliver integrated, factory-built solutions will gain a significant market advantage, as on-site construction time becomes the most critical variable.

• Watch for an increase in partnerships between cooling technology vendors and modular data center manufacturers. Schneider Electric’s focus on creating liquid cooling reference designs is an early signal of this trend, aiming to standardize and de-risk deployment.
• The market will place a premium on solutions that reduce dependency on strained resources. Zuta Core’s waterless cooling technology, backed by Carrier, is well-positioned, as water usage becomes a key permitting issue in many regions.
• Hyperscalers will likely vertically integrate further or make more strategic acquisitions to secure their cooling supply chain. An acquisition of a specialized CDU or piping manufacturer by a major tech company is a plausible scenario to mitigate project delays.
• Expect the “cooling-as-a-service” model to gain traction, where third-party specialists own and operate the thermal management infrastructure. This allows data center operators to convert a large Cap Ex outlay into a predictable Op Ex cost, accelerating adoption.

The questions your competitors are already asking

This report covers one angle of the infrastructure bottlenecks created by the AI-driven demand for liquid cooling. The questions that matter most depend on your work.

• Which component suppliers like Perma-Pipe are gaining or losing ground in the data center liquid cooling market?
• What is the outlook for liquid cooling deployment in AI data centers, and can the supply chain meet the 2033 projection of a $29.2B market?
• Who are the key suppliers of pipes, pumps, and Coolant Distribution Units (CDUs) for hyperscalers deploying NVIDIA Blackwell-based infrastructure?

This report does not answer these. Enki Brief Pro does.

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