Data Center Cooling Market Outlook 2035: Rising AI Workloads and Sustainability Goals Accelerate Demand for Advanced Cooling Technologies

The global Data Center Cooling Market is entering a transformative phase as the rapid expansion of artificial intelligence (AI), cloud computing, and hyperscale data centers continues to increase heat loads and energy consumption. Valued at US$ 21.2 Bn in 2024, the market is projected to reach US$ 73.4 Bn by 2035, expanding at a robust CAGR of 11.9% from 2025 to 2035. The market’s growth trajectory is largely driven by the increasing need for efficiency in data centers, along with a strong industry-wide focus on energy optimization and sustainability.

As digital infrastructure becomes the backbone of modern economies, cooling systems are evolving from basic support infrastructure into a strategic necessity for ensuring operational reliability, performance optimization, and environmental compliance.

Growing Importance of Cooling in Modern Data Centers

Data center cooling refers to technologies and systems used to regulate temperature, humidity, and airflow inside data centers to prevent overheating of IT equipment. With data centers housing high-density computing systems, maintaining thermal balance has become more critical than ever.

The rise of AI workloads, machine learning (ML), high-performance computing (HPC), and edge computing has significantly increased thermal output from servers. Traditional cooling systems are often unable to handle these heat-intensive environments efficiently. As a result, advanced cooling technologies such as liquid cooling, immersion cooling, and AI-powered thermal management are becoming increasingly important.

Data centers consume substantial energy, and cooling alone can account for nearly 40% of total facility energy consumption. This has made cooling efficiency a top priority for operators looking to reduce operational costs and improve Power Usage Effectiveness (PUE).

AI and Cloud Expansion Driving Market Growth

One of the major factors fueling the growth of the data center cooling market is the exponential increase in cloud services and AI applications. Global enterprises are increasingly relying on cloud infrastructure for data storage, processing, and analytics, creating demand for larger and more powerful data centers.

Major technology companies such as Amazon, Google, and Microsoft continue to invest heavily in expanding their data center capacity. According to industry estimates, combined capital investment by these AI leaders in 2023 exceeded that of the entire U.S. oil and gas industry, highlighting the scale of digital infrastructure development.

Furthermore, government-backed initiatives are accelerating investments. In January 2025, the UK government announced US$ 17.0 Bn worth of data center projects under its AI action plan, aimed at creating AI growth zones and boosting computational power.

Such developments directly translate into greater demand for advanced cooling systems capable of supporting intensive computing environments.

Sustainability and Energy Efficiency Become Core Priorities

Sustainability is no longer optional for data center operators. Increasing environmental concerns, stricter regulations, and corporate ESG commitments are pushing organizations toward greener infrastructure.

Traditional air-conditioning systems consume massive amounts of electricity and often rely on refrigerants with high global warming potential. In response, the industry is shifting toward sustainable alternatives such as:

• Liquid Cooling Systems for efficient heat transfer
• Free-Air Cooling to reduce mechanical refrigeration dependence
• Evaporative Cooling for lower water and energy usage
• AI-Based Cooling Optimization for real-time energy management

Government initiatives such as the U.S. Department of Energy’s Better Buildings Challenge and EPA’s ENERGY STAR certifications are encouraging data centers to adopt efficient cooling technologies.

Additionally, incentives such as tax credits, subsidies, and green financing schemes are making sustainable cooling investments more attractive for operators worldwide.

Rise of Liquid and Immersion Cooling Technologies

Among the latest trends, liquid cooling technologies are emerging as one of the most promising solutions for next-generation data centers.

Unlike conventional air cooling, liquid cooling directly absorbs heat from processors, offering significantly better thermal efficiency. This makes it ideal for AI servers, GPU clusters, and HPC systems.

Key liquid cooling methods gaining momentum include:

• Direct-to-chip cooling
• Immersion cooling
• Rear-door heat exchangers

Immersion cooling, in particular, is gaining attention due to its ability to handle extremely high-density workloads while lowering energy usage and reducing hardware wear.

As AI models continue to scale, the adoption of liquid cooling is expected to accelerate substantially over the forecast period.

Air Conditioners Continue to Dominate Product Segment

By product type, the Air Conditioners segment accounted for the largest market share of 35.70% in 2024, making it the dominant segment in the global market.

Precision air conditioners remain a crucial component in data center infrastructure because they provide controlled cooling, humidity management, and optimized airflow distribution. These systems ensure that server environments remain stable, preventing performance degradation and equipment failures.

Their widespread adoption is attributed to:

• Proven reliability
• Continuous operation capability
• Targeted cooling efficiency
• Compatibility with existing infrastructure

While advanced liquid cooling is gaining popularity, air conditioning systems continue to remain the preferred solution across traditional enterprise data centers.

North America Leads Global Market Expansion

Regionally, North America dominated the global data center cooling market in 2024, accounting for 39.7% of total revenue share.

The region benefits from a highly developed digital ecosystem, with a strong presence of hyperscale operators and cloud service providers such as Amazon Web Services, Microsoft Azure, and Google Cloud.

The United States remains the largest contributor, driven by rising AI adoption, growing enterprise digitization, and increasing investments in cloud infrastructure.

Canada is also emerging as an attractive location for data centers due to its cooler climate and abundant renewable energy resources, which support free cooling technologies and lower carbon footprints.

Meanwhile, Asia Pacific is expected to witness the fastest growth during the forecast period, supported by rapid digitalization in China, India, Japan, and South Korea.

Modular and Scalable Cooling Systems Gain Popularity

Another notable trend in the market is the growing preference for modular and scalable cooling solutions.

As edge data centers continue to expand, operators need flexible cooling systems that can be deployed quickly and scaled according to demand. Modular cooling units offer benefits such as:

• Faster installation
• Lower upfront costs
• Improved efficiency
• Easier maintenance

These systems are particularly suitable for remote edge deployments where space and resources may be limited.

This shift aligns with the growing trend of decentralized data processing, further creating opportunities for cooling solution providers.

Competitive Landscape and Strategic Developments

The data center cooling market is highly competitive, with several global players focusing on innovation, partnerships, and product expansion.

Leading companies operating in the market include Vertiv Group Corp., Daikin, Johnson Controls, Trane Technologies, Schneider Electric, Carrier, Siemens, GRC, Dell Inc., Munters AB, Modine, STULZ GmbH, Black Box, Delta Power Solutions, FLEX LTD, Boyd, and ALFA LAVAL.

Recent industry developments highlight strong momentum:

• In March 2025, Vertiv partnered with Tecogen Inc. to integrate natural gas-powered chiller technologies into global data center cooling solutions.
• In June 2025, Green Revolution Cooling (GRC) secured fresh investments from Samsung Ventures, SK Enmove, HTS, and ENEOS, strengthening its market position.

These collaborations demonstrate the increasing importance of innovative cooling systems in meeting future infrastructure demands.

Future Outlook

The future of the data center cooling market looks highly promising as digital transformation accelerates across industries. AI adoption, cloud expansion, and increasing data generation will continue to drive demand for advanced and efficient cooling technologies.

At the same time, sustainability goals and energy efficiency mandates will shape purchasing decisions, encouraging operators to invest in eco-friendly, intelligent, and scalable cooling systems.

With innovations such as liquid immersion cooling, AI-based thermal optimization, and modular cooling infrastructure gaining traction, the market is poised for sustained expansion and technological advancement through 2035.

As data centers become larger, denser, and more energy-intensive, cooling will remain a mission-critical component in supporting the future of the global digital economy.