Data center operators are gambling tens of millions on outdated cooling technology. The conversation around data center cooling is not only changing—it’s being completely redefined by the economics of AI. The stakes have never been higher.
The rapid advancement of AI has transformed data center economics in ways few predicted. When a single rack of AI servers costs around $3 million—as much as a luxury home—the chance calculation fundamentally changes. As Andreessen Horowitz co-founder Ben Horowitz recently cautioned, data centers financing these massive hardware investments “could get the other way up very fast” in the event that they don’t fastidiously manage their infrastructure strategy.
This latest reality demands a fundamental rethinking of cooling approaches. While traditional metrics like PUE and operating costs are still essential, they’re secondary to protecting these multi-million-dollar hardware investments. The true query data center operators needs to be asking is: How can we best protect our AI infrastructure investment?
The Hidden Risks of Traditional Cooling
The industry’s historic reliance on single-phase, water-based cooling solutions carries increasingly unacceptable risks within the AI era. While it has served data centers well for years, the thermal demands of AI workloads have pushed this technology beyond its practical limits. The rationale is straightforward physics: single-phase systems require higher flow rates to administer today’s thermal loads, increasing the chance of leaks and catastrophic failures.
This is not a hypothetical risk. A single water leak can immediately destroy tens of millions in AI hardware—hardware that always has months-long substitute lead times in today’s supply-constrained market. The fee of even a single catastrophic failure can exceed an information center’s cooling infrastructure budget for a complete 12 months. Yet many operators proceed to depend on these systems, effectively gambling their AI investment on aging technology.
At Data Center World 2024, Dr. Mohammad Tradat, NVIDIA’s Manager of Data Center Mechanical Engineering, asked, “How long will single-phase cooling live? It’ll be phased out very soon…after which the necessity might be for two-phase, refrigerant-based cooling.” This isn’t only a growing opinion—it’s becoming an industry consensus backed by physics and financial reality.
A Latest Approach to Investment Protection
Two-phase cooling technology, which uses dielectric refrigerants as an alternative of water, fundamentally changes this risk equation. The fee of implementing a two-phase cooling system—typically around $200,000 per rack—needs to be viewed as insurance for shielding a $5 million AI hardware investment. To place this in perspective, that is a 4% premium to guard your asset—considerably lower than insurance rates for other multi-million dollar business investments. The business case becomes even clearer once you consider the potential costs of AI training disruption and idle infrastructure during unplanned downtime.
For data center operators and financial stakeholders, the choice to speculate in two-phase cooling needs to be evaluated through the lens of risk management and investment protection. The relevant metrics should include not only operating costs or energy efficiency but additionally the overall value of hardware being protected, the fee of potential failure scenarios, the future-proofing value for next-generation hardware and the risk-adjusted return on cooling investment.
As AI continues to drive up the density and value of information center infrastructure, the industry must evolve its approach to cooling strategy. The query is not whether to maneuver to two-phase cooling but when and transition while minimizing risk to existing operations and investments.
Smart operators are already making this shift, while others risk learning an expensive lesson. In an era where a single rack costs greater than many data centers’ annual operating budgets, gambling on outdated cooling technology is not only dangerous – it’s potentially catastrophic. The time to act is now—before that risk becomes a reality.
