The rapid expansion of artificial intelligence is creating a new investment opportunity beyond semiconductors and cloud computing as soaring energy demand in data centers drives growing interest in liquid cooling technologies.
As AI systems become more powerful, the enormous heat generated by servers is forcing technology companies and hyperscalers to rethink how they cool their infrastructure.
Analysts and investors increasingly believe the shift could create a major growth market for companies supplying cooling systems, thermal management hardware and related infrastructure.
Shawn Tuteja, who oversees ETF and custom baskets volatility trading within Goldman Sachs Global Banking & Markets, said liquid cooling was becoming one of the fastest-growing themes tied to the AI boom.
“Our baskets team sees the next spin-off or the next iteration of the AI equipment trade being within liquid cooling,” Tuteja said.
AI energy demands reshape data center infrastructure
Traditional air-cooled data centers consume enormous amounts of electricity, with cooling systems often requiring nearly as much power as the computing equipment itself.
Liquid cooling systems, however, can dramatically reduce energy usage by transferring heat more efficiently.
“With liquid cooling technology, you can significantly reduce by as much as 10X the amount of electricity that goes towards cooling,” Tuteja said.
“And you can shift that more towards the power and distribution of actually fueling the AI trade.”
He added that the theme has already gained momentum among investors and operators.
“The theme is up about 30 percent year to date. And we’re seeing that trend catch on with a lot of data centers looking for that type of equipment,” he said.
Analysts say the transition is becoming increasingly important as next-generation AI models require greater computing density and power consumption.
According to 22V Research analyst Dauvin Peterson, advanced thermal management is becoming “an essential element to maximize AI token production and hyperscaler investment ROI.”
AI tokens, which represent fragments of an AI model’s generated response, are increasingly viewed as the core unit underpinning pricing and monetization across the industry.
Nvidia systems accelerate adoption
The shift toward liquid cooling is expected to intensify with the rollout of new AI server architectures from NVIDIA.
“The shift to full liquid cooling racks occurred with the release of the Nvidia Vera Rubin configurations slated to ship later in 2026,” Peterson said.
“These are being configured, built, and shipped with integrated liquid cooling systems.”
Peterson added that liquid cooling was quickly becoming a standard component for large-scale AI infrastructure projects.
“As a standard for AI factories, it presents a clear and credible demand pull,” he said.
That growing demand is benefiting a wide range of industrial, infrastructure and engineering companies tied to cooling systems and power management.
Stocks to watch out for
Earlier this month, Peterson highlighted several companies positioned to benefit from the trend, including HVAC manufacturers Carrier, Trane Technologies and Johnson Controls.
Carrier recently said data-center-related orders surged more than 500%, with Chief Executive David Gitlin noting that the company’s backlog now fully covers its $1.5 billion sales target for the segment this year.
Trane Technologies also reported rising momentum in commercial HVAC demand linked to AI infrastructure.
At the end of the first quarter, the company’s commercial HVAC backlog had increased by $2.7 billion from year-end levels, helped by its $1 billion acquisition of data-center cooling specialist Stellar Energy.
Infrastructure providers are also seeing strong demand growth.
Vertiv, which supplies power and cooling systems for data centers, recently reported first-quarter adjusted earnings of $1.17 per share, above analyst estimates of $1.
Revenue climbed 30% to $2.7 billion.
The company also raised its full-year outlook, forecasting earnings between $6.30 and $6.40 per share, above Wall Street expectations.
Vertiv shares have risen 84% this year and more than 200% over the past 12 months.
TD Cowen recently raised its price target on the stock to $387 from $347 while maintaining a Buy rating.
Eaton also posted better-than-expected quarterly earnings, helped by strong AI-related demand from data-center customers.
Meanwhile, Ecolab is expanding further into the market through its planned $4.8 billion acquisition of liquid-cooling hardware provider CoolIT.
Other companies benefiting from the trend include Madison Air, Dover, Chemours, and Solstice Advanced Materials, which supply refrigerants and thermal management systems used in next-generation cooling infrastructure.
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