Key Takeaways:
The race to build artificial intelligence infrastructure is creating a secondary boom for an essential, and often overlooked, component: cooling. As next-generation AI chips consume more power and generate intense heat, traditional air conditioning is proving insufficient, forcing a market-wide shift to advanced liquid cooling and creating a windfall for a select group of industrial and technology suppliers.
"The shift to full liquid cooling racks occurred with the release of the Nvidia Vera Rubin configurations slated to ship later in 2026," 22V Research’s Dauvin Peterson said in a report. "As a standard for AI factories, it presents a clear and credible demand pull."
The demand is already showing up in corporate order books. Heating, ventilation, and air conditioning (HVAC) giant Carrier reported that its data center orders were up over 500% in the first quarter. Trane Technologies saw its commercial HVAC backlog swell by $2.7 billion, boosted by its $1 billion acquisition of data center cooling specialist Stellar Energy. The M&A activity is escalating, with Ecolab announcing a $4.8 billion deal to purchase liquid cooling hardware provider CoolIT.
This surge in demand reflects the immense capital flowing into AI. Analysts project that global spending on data center buildouts could exceed $7 trillion by 2030. For investors, this has translated into significant gains. A group of 12 cooling-related stocks, including Carrier, Trane, and Eaton, has risen an average of 100% over the past year. The group now trades at a premium, averaging 31 times estimated 2026 earnings, well above the S&P 500's 22 times multiple.
Power management company Eaton (ETN) exemplifies the trend. The company, a direct beneficiary of the AI buildout, saw orders in its Electrical America segment jump 200%, contributing to a backlog of nearly $20 billion. The company's "grid-to-chip" strategy aims to have its products, from transformers to circuit breakers, touch every part of the AI supply chain.
To capture the thermal management opportunity directly, Eaton acquired Boyd Thermal for $9.5 billion last year, a move that gives it a strong position in liquid cooling technologies. Eaton expects this business segment to grow by a remarkable 35% annually over the next three years. The broader electrification of the economy provides another tailwind, with U.S. utility companies expected to invest $1.4 trillion in grid infrastructure by 2030 to support the increased load from AI and EVs.
However, the explosive growth of data centers is not without controversy. Communities in states like Michigan and Utah have pushed back against new projects, citing concerns over massive electricity and water consumption. A single large-scale data center can consume as much energy as a small city and use millions of gallons of water for cooling, putting a strain on local resources, particularly in drought-prone regions.
The debate has become a national issue, with figures like investor Kevin O'Leary arguing that local opposition, which he claimed was amplified by AI-generated campaigns, threatens critical U.S. infrastructure and technological competitiveness. These disputes highlight a growing tension between the strategic national priority of AI leadership and local environmental and social costs.
Despite these hurdles, the investment continues to pour in. In Thailand, a joint venture between Digital Edge and B.Grimm Power recently secured a record-setting $880 million green loan to finance a 100MW data center campus designed for AI workloads. Investors are betting that the sheer scale of demand from hyperscalers will outweigh the risks. They are looking for a dynamic similar to that seen in shares of GE Vernova, which surged on the back of its growing backlog for power generation equipment tied to AI. While regulatory and community pushback remains a risk, the AI arms race is fundamentally an energy and cooling race, and the companies providing the picks and shovels are reaping the rewards.
This article is for informational purposes only and does not constitute investment advice.
