data centres newsletter evolution of data centre cooling - COE Chakra
Data Centres The Evolution of Data Centre Cooling Newsletter
Data Centres The Evolution of Data Centre Cooling Newsletter
The Evolution of Data Centre Cooling
How Rising Computing Density is Redefining Thermal Management
For most of the history of data centres, cooling attracted little attention outside engineering teams. Project discussions centred on power availability, fibre connectivity, physical security and uptime, while cooling was largely viewed as a mechanical utility responsible for maintaining acceptable operating temperatures. As long as servers generated manageable amounts of heat, conventional air-conditioning systems were more than adequate.
Artificial intelligence has fundamentally altered this equation.
The challenge is no longer simply removing heat; it is removing unprecedented amounts of heat from increasingly compact spaces. Modern AI infrastructure is pushing computing densities to levels that were unimaginable a decade ago, forcing the industry to rethink how heat is managed inside the data centre. Cooling has consequently evolved from a supporting building service into one of the principal considerations influencing facility design, capital investment and operating efficiency.
The financial implications are equally significant. Cooling systems make up a significant portion of pre-chip capital expenditure. Their total costs vary per megawatt of IT capacity based on the chosen cooling architecture, local climatic conditions, and specific redundancy requirements. Cooling decisions are therefore no longer confined to mechanical engineering; they influence the economics and long-term adaptability of the entire facility.
Understanding why cooling has become so important requires looking beyond cooling technologies themselves. It begins with understanding how computing has changed.
When Air Cooling Was Enough
Early enterprise data centres were designed around CPU-based servers supporting business applications, databases and storage. Typical rack densities ranged between 3 kW and 8 kW, generating heat loads that could be managed effectively using Computer Room Air Conditioners (CRACs) or Computer Room Air Handlers (CRAHs). Chilled air was supplied through raised floors or overhead ducts, while hot-aisle and cold-aisle arrangements improved airflow by preventing the mixing of hot exhaust air with cooled supply air.

This approach proved remarkably resilient. As enterprise computing expanded, improvements such as aisle containment, variable-speed fans and more efficient air management enabled gradual increases in computing density without fundamentally changing the cooling philosophy. Because processor power increased incrementally, the industry could continue refining conventional air cooling rather than replacing it.
Even the rapid growth of cloud computing during the previous decade did not immediately render air cooling obsolete. Instead, hyperscale operators improved airflow management and introduced in-row cooling systems or rear-door heat exchangers to support higher rack densities while preserving much of the existing mechanical infrastructure.
Cooling remained an exercise in moving larger volumes of air more efficiently.
The Thermal Challenge Changed Before the Cooling Technology Did
The real transformation was not triggered by cooling innovation.
It was triggered by changes in computing architecture.
Traditional enterprise servers relied primarily on Central Processing Units (CPUs), which were designed to execute a broad range of sequential computing tasks. Artificial intelligence introduced a different processing model. Training and inference workloads rely heavily on Graphics Processing Units (GPUs), which perform thousands of parallel mathematical operations simultaneously. The result is a dramatic increase in computational capability—but also in power consumption
Successive generations of AI hardware illustrate the pace of this change:
These numbers represent more than larger electricity bills.
Every watt consumed by computing equipment is ultimately released as heat.
The challenge facing data centre designers is therefore not simply one of supplying additional electrical power; it is removing that heat quickly enough to maintain reliable operating temperatures. As heat becomes concentrated within smaller physical spaces, increasing airflow alone becomes progressively less effective. Higher fan speeds consume more energy, create greater pressure losses and eventually reach practical limits beyond which additional airflow delivers diminishing returns.
The issue, therefore, is not the total amount of heat generated by a data centre, but the concentration of that heat within individual processors and racks. This distinction explains why facilities designed only a few years ago may struggle to accommodate the latest AI hardware without significant modifications.

From Cooling Rooms to Cooling Chips
Recognising this distinction fundamentally changes how cooling technologies are viewed.
The industry’s progression from room-level air cooling to liquid cooling is often described as a replacement of one technology by another. In reality, it represents a gradual movement towards placing cooling ever closer to the source of heat.

Each stage follows the same engineering principle: as heat density increases, thermal management must move progressively closer to where heat is generated.
That progression continues to define the evolution of modern data centre cooling.
A Continuum Rather Than a Replacement
Cooling technologies are often presented as competing alternatives, implying that liquid cooling will eventually replace air cooling. In practice, the industry is moving towards a continuum of cooling solutions, with the appropriate architecture determined by computing density rather than technological preference.
For enterprise workloads and lower-density cloud environments, optimised air cooling remains both technically effective and economically attractive. Improvements in airflow management, hot-aisle and cold-aisle containment, and higher-efficiency CRAH systems continue to support rack densities that would have been considered demanding only a decade ago.
As densities increase further, cooling must move closer to the source of heat. Rear-door heat exchangers capture heat immediately as air exits the rack, extending the capability of conventional air-cooled facilities while requiring relatively limited changes to the existing data hall. This makes them particularly attractive for retrofitting operational facilities that were originally designed for lower rack densities.
Beyond this range, direct-to-chip liquid cooling is becoming the preferred solution for AI infrastructure. Coolant circulates through cold plates attached directly to high-power processors, removing heat before it spreads through the server enclosure. Because liquids have a significantly greater capacity to absorb and transport heat than air, this approach enables substantially higher rack densities while reducing the energy required to move large volumes of air.
Immersion cooling represents the most advanced thermal management approach, with servers operating while submerged in dielectric fluid. Although capable of supporting extremely high heat loads, adoption remains relatively limited. Equipment compatibility, maintenance practices, operational familiarity and vendor ecosystems continue to influence deployment decisions. Consequently, industry consensus suggests that future data centres are unlikely to converge around a single cooling technology. Instead, different cooling architectures will coexist, each serving different workload requirements.
Cooling Does Not End at the Rack
Another common misconception is that cooling is determined solely by the technology deployed inside the server rack.
In reality, cooling is a complete thermal management system with two complementary layers:

Both systems must operate efficiently for the data centre to maintain reliable operating temperatures.
This distinction becomes increasingly important as AI deployments grow in scale. A highly efficient direct-to-chip cooling system offers limited benefit if the facility cannot reject the accumulated heat efficiently. Similarly, retrofitting only the server-level cooling without evaluating the capacity of the broader cooling plant may simply relocate thermal constraints rather than eliminate them.
Recent industry guidance also highlights another practical consideration. Even direct-to-chip liquid cooling typically removes only a portion of the total rack heat; residual heat from memory, storage devices, networking equipment and power supplies continues to be dissipated into the surrounding air. Consequently, liquid cooling complements rather than completely replaces air-side thermal management.
Location Shapes Cooling Design
Cooling architecture is influenced not only by computing density but also by geography.
Ambient temperature, humidity and water availability directly affect both system performance and operating costs. Facilities located in hotter climates require greater heat rejection capacity than equivalent facilities in cooler regions, increasing both capital investment and energy consumption. Cooling infrastructure costs vary materially across locations because climatic conditions influence the size and complexity of heat rejection systems.
Water is becoming an equally important design consideration. Evaporative cooling systems generally consume less electricity than air-cooled alternatives but require substantially greater water usage. In regions facing water stress or tighter environmental regulations, developers may instead favour air-cooled heat rejection despite its higher energy consumption. Cooling architecture is therefore shaped by local resource availability as much as by computing requirements.
The same AI workload may consequently result in different cooling solutions depending on where the facility is built.
Beyond Thermal Management
The transformation of cooling infrastructure reflects a fundamental shift in data centre design philosophy. Historically, cooling systems were engineered to support the specific IT hardware configuration deployed on the day a facility became operational. Today, cooling architecture directly dictates the types of high-density chips and parallel computing workloads a facility can accommodate over a ten-year lifecycle. The objective has expanded from day-to-day temperature control to long-term asset future-proofing.
This shift directly changes how infrastructure investments are evaluated:
- Initial Capital Commitments: Implementing advanced liquid cooling architectures increases initial capital expenditure due to the requirement for specialized piping, coolant distribution units (CDUs), and dedicated fluid infrastructure.
- Operational Balancing: For AI-intensive environments, these higher upfront costs are balanced by structural gains in energy efficiency, enhanced computing density per square metre, and reduced long-term utility expenses.
Evaluating cooling technologies requires a shift in focus toward Total Cost of Ownership (TCO) rather than upfront equipment costs alone. By transitioning from an isolated operational utility into a pillar of core infrastructure planning, cooling now serves as a primary driver of a facility's expansion potential, lifecycle economics, and commercial adaptability.
Conclusion
The history of data centre cooling is, in many respects, the history of modern computing.
As processors evolved from conventional enterprise CPUs to increasingly powerful AI accelerators, thermal management evolved from room-level air conditioning to sophisticated cooling architectures capable of managing concentrated heat loads. Each stage of this progression reflects the same underlying principle: increasing computing density demands increasingly efficient heat removal.
Air cooling has not become obsolete, nor will liquid cooling represent a universal solution. Instead, the industry is assembling a portfolio of cooling technologies, each matched to different workload characteristics, rack densities and operating environments. Understanding this evolution provides valuable insight into how modern data centres are designed—not simply to meet today’s computing requirements, but to remain adaptable as the next generation of AI hardware reshapes the industry once again.
Authored by
Ayesha Conrad Fernandes (Credit Analyst)
SBI CHAKRA Centre of Excellence
Source: Secondary Research
Data Centers Sectoral Insights
India’s data center industry is undergoing a structural shift, propelled by growing digital adoption, regulatory clarity, and the accelerating demand for compute linked to artificial intelligence. As of 2025, installed co-location capacity stands at approximately 1.5 GW. This figure is expected to rise to over 6.5 GW by 2030, underpinned by sustained hyperscaler investments and continued demand from regulated enterprise segments. Capacity growth is geographically concentrated in Mumbai, Noida, Hyderabad and Chennai, supported by access to stable power, submarine cable landing points, and active state-level incentive frameworks.
Policy changes have created a favourable regulatory environment that is steering demand toward domestic, compliant infrastructure. The enforcement of the Digital Personal Data Protection Act (DPDA) and prior RBI directives on data localization have prompted enterprises to reassess infrastructure strategies. AI workloads are further intensifying demand for advanced computing environments, prompting a reconfiguration of data centre design. Rack density, power throughput, and thermal efficiency have become core performance benchmarks. Government-led initiatives, including the IndiaAI Mission, are accelerating investment in GPU clusters and hybrid compute platforms, reinforcing the urgency for scalable, AI-ready infrastructure. In parallel, the GOI has introduced a suite of policy measures to position the country as a global hub for data centres and digital infrastructure. The Union Budget 2026–27 reinforces this direction, notably through a proposed tax holiday for cloud and AI-driven services until 2047, aimed at providing long-term fiscal visibility and supporting a sustained, investment-conducive ecosystem.
These shifts are redefining the occupier landscape. Hyperscale cloud providers are leveraging a mix of leased and built capacity to optimize cost and control, with leasing used for rapid market entry and builds favoured for long-term economics. BFSI and ITeS enterprises are moving from legacy captive infrastructure to colocation formats, driven by regulatory compliance needs and cost rationalization. Meanwhile, digital-native firms are increasingly favouring hybrid cloud solutions that balance performance with capital efficiency. In response, operators such as STT GDC, NTT, Nxtra, Yotta, and CtrlS are scaling aggressively and differentiating through value-added services, renewable power integration, and AI-supportive data centre stacks. Emerging entrants in India include players such as AdaniConneX, Digital Connexion, Equinix, Sify,CapitalLand, RMZ Colt, L&T Vyoma and Reliance Jio.
Technology transitions are influencing both hardware and facility formats. Traditional tower-based servers are being replaced by rack-scale and multi-node architectures to accommodate dense computing loads. SSDs are becoming the dominant storage medium in enterprise deployments, supporting faster I/O and energy optimization. Legacy air cooling solutions are approaching their physical limits, particularly beyond 15 kW per rack, leading to early-stage adoption of direct-to-chip and immersion cooling. The sector also continues to face structural power challenges, with operators deploying battery storage, on-site generation, and redundancy systems. However, dependence on grid stability remains a constraint in Tier 1 cities.
As demand grows, the development model is becoming more capital intensive, requiring structured financing strategies aligned with global precedents. Best-in-class capital frameworks include debt service coverage thresholds, margin ratchets linked to energy efficiency metrics, and escrow-based cash flow management. Syndicated structures increasingly rely on fixed-price EPC contracts and anchor tenant commitments for a significant share of initial capacity.
India now ranks among the most compelling global markets for digital infrastructure deployment. A confluence of strong demand, policy stability, and rising institutional interest is shaping a deep pipeline of investible assets. For financial institutions, the opportunity lies in adopting an infrastructure-grade underwriting approach that emphasizes long-term cash flow stability, ESG alignment, and contractual safeguards. This requires disciplined avoidance of speculative builds with unclear demand. Priority should be placed on operator-led greenfield developments with clear tenant visibility, low energy intensity, and reliable grid access.
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Last Updated On : Wednesday, 02-09-2026
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