- Dell'Oro's latest data shows that the liquid cooling market was on fire in Q1 2025
- Immersion cooling is less popular than direct-to-chip but is serving several niche use cases
- Power systems also face major change
The data center physical infrastructure (DCPI) market – which includes both power systems and thermal management – is turning into a runaway train. In an exclusive interview, Dell’Oro Group’s Alex Cordovil told Fierce the segment recorded a high-teens growth rate in Q1 2025. The main driver behind that growth? Liquid cooling.
Cordovil said uninterruptible power supplies (UPS) have historically accounted for nearly 40% of the DCPI market. While that number has decreased slightly each year recently, liquid cooling is more than filling the gap on the thermal management side of the equation.
In Q1 alone, Cordovil said liquid cooling revenue surged 144% year-over-year, and the segment is shaping up to hit well over $2 billion for the full year. The latter figure is only expected to increase with time.
Last year, Dell’Oro predicted that the overall thermal management market (encompassing both liquid and air cooling) would reach $13 billion by 2028, with liquid cooling accounting for approximately $4.29 billion of that total. That expectation was tied to a DCPI market estimated to reach over $50 billion by 2028.
In February, Dell’Oro increased its DCPI forecast to call for $61 billion in revenue by 2029 after 2024 receipts came in higher than expected. Dell’Oro’s fully revised five-year forecast is due soon.
Cooling in focus
As expected, direct-to-chip solutions are leading the charge, particularly in large data center deployments.
Immersion cooling is finding a niche for itself among crypto mining operations as well as with research, education and government clients, Cordovil said. Immersion cooling is also proving to be a great fit for enterprise and industrial deployments where a bit of edge compute muscle is needed but frequent hardware upgrades are not required.
Nvidia could turn the tide in immersion's favor. The chip giant and others like it haven’t yet extended their warranties to cover immersion deployments, which means companies who choose to pursue them can be putting a lot of money on the line. But if that changes and immersion deployments are covered? Well, then the scales may be a bit more balanced and momentum behind immersion could grow, Cordovil said.
Power play
While the shift from air to liquid cooling has garnered considerable attention, power systems are also changing. That’s in part because – as we’ve mentioned before – data center operators are eyeing much higher rack power levels that would require a shift from alternating current to direct current.
Today, Cordovil said anywhere from 2% to 5% of energy in a data center is consumed by UPS systems, which convert DC to AC and vice versa.
“If you can take that out of the way, when we’re talking about these gigawatt [data center] deployments that starts adding up and that starts becoming real money,” he said.
The shift to UPS-less designs is still in the very early stages, Cordovil said, with little to no impact on the market forecast expected over the next 12 months or so. But looking farther ahead “that will be an important discussion,” he concluded.