A decade ago, immersion cooling was a niche fix for crypto miners trying to keep their rigs from overheating. Fast forward to today, and it’s emerging as a strategic solution for one of the most pressing challenges in digital infrastructure: thermal management.
As AI and high-performance computing (HPC) push data centers to their limits, the industry is facing a cooling crisis. Traditional HVAC systems, which can consume up to 40% of a data center’s total energy, are no longer sustainable, and the numbers tell a clear story. global average PUE (Power Usage Effectiveness) has flatlined over the past decade, despite massive investments in efficiency.
The Pressure Is Mounting
Governments across the globe, from the US and EU to Singapore and China, are tightening regulations on new data center builds due to their energy footprint. In Ireland and Denmark, data centers are projected to account for up to 31% of total electricity demand by 2026. Meanwhile, AI infrastructure is booming, fueled by mega-investments like the $500 billion Stargate project and Microsoft’s $765 million build in Texas.
The result? Data centers are being asked to do more, faster, and greener, while their cooling systems struggle to keep up.
Immersion Cooling: From Niche to Necessity
Immersion cooling offers a radical rethink. By submerging servers in dielectric fluids, it slashes HVAC energy use, improves thermal efficiency, and opens the door to higher rack densities. It’s not just about cooling, it’s about enabling the next generation of chips, like those from Nvidia and AMD, which generate heat levels that air cooling simply can’t handle.
Kline’s research shows that immersion cooling starts to make economic and operational sense when rack-level thermal loads exceed 70-100kW. While that’s still a small slice of the market today, it’s growing fast.
The Value Chain Is Heating Up
The immersion cooling ecosystem is evolving rapidly. Fluid suppliers like Valvoline, Petronas, and Oleon are entering the space, forming partnerships with chipmakers and server OEMs.
Meanwhile, Shell, who entered the immersion coolants space in collaboration with Asperitas in 2020, has only become more established with their immersion cooling fluid recently receiving fluid certification by Intel.
This isn’t just product innovation, it’s strategic alignment across the value chain. The industry is preparing for a future where immersion cooling isn’t optional, but essential.
Signals for Strategic Clarity in a Shifting Market
The data center industry isn’t just evolving, it’s being redefined. And three signals are pointing the way forward:
- PUE Plateau Meets AI Surge: Efficiency gains have stalled just as AI workloads are skyrocketing. The pressure to rethink cooling is mounting.
- Rack Density Is Quietly Crossing the Threshold: Next-gen chips are pushing thermal loads higher, such as Nvidia’s GB200 NVL72 system which has rack level thermal loads past 130 kW. Immersion cooling is no longer experimental, it’s becoming essential.
- The Value Chain Is Mobilizing: From fluid suppliers to chipmakers, strategic partnerships are forming fast. The market is aligning around immersion cooling as the future.
These signals don’t just point to a market shift; they invite a conversation.
About how we design infrastructure for the future. About how we balance performance with sustainability. And about how we collaborate across the value chain to make smarter decisions.
At Kline, we’re not just observing these changes. We’re working with industry leaders to understand them, anticipate them, and act on them. If you’re navigating this space, we’d love to hear your perspective. What signals are you watching? What challenges are you facing? And what opportunities do you see on the horizon? Connect with us.
