TL;DR · 30-second read
The Short Version
The giant computer buildings behind artificial intelligence run hot, and many cool down by evaporating water, the way sweat cools skin. A standard setup can use about four Olympic swimming pools of water a year for each block of computers drawing the power of several hundred homes.
New water laws in California, Utah and Europe are changing that. A research firm forecasts that coolers which use water only on the hottest days will be the fastest-growing kind. The catch: they cost more to buy and use more electricity to save that water.
DC Market Insights, a London-based research firm, published a forecast on October 19, 2026 valuing the global data center cooling tower market at $1.12 billion in 2025 and $1.30 billion in 2026. It projects $2.44 billion by 2035, a compound annual growth rate (CAGR) of 8.06%, with a low case of 6.11% and a high case of 9.87%.
The fastest-growing product is the hybrid and adiabatic cooler, at 12.39% a year, rising from 25.0% to 37.0% of market value. Open-circuit towers, the cheapest and most water-intensive design, grow only 4.76% a year. The firm credits the shift to water-use disclosure laws in the European Union, California and Utah, and to liquid-cooled AI racks that accept 45 °C coolant and can run on waterless dry coolers.
Executive Summary
Cooling towers reject data center heat by evaporating water. The report’s central argument is that spending in this niche now follows water rules rather than heat loads. Evaporative designs still use the least electricity of any heat rejection method. Water-disclosure regulation and hotter-running liquid cooling, however, are steering new campuses toward designs that use less water and more fan power.
This matters beyond a $2.44 billion equipment category. Operators building AI campuses face a real three-way trade-off between water, grid power and capital. DC Market Insights’ own cost model puts a price on part of that trade. A hybrid or adiabatic cooler cuts water use by 75% to 90% compared with an open tower, at roughly $75,000 to $85,000 more equipment per megawatt of IT load. It also uses more fan and pump energy.
The report also points to a quieter shift. Replacement, rebuild and service work rises from 36.2% to 43.4% of market spending by 2035, as towers installed during the 2015-2025 build boom reach mid-life.
Saving Water Is Paid for in Capital and Electricity
The headline growth gap, 12.39% a year for hybrid and adiabatic units against 8.06% for the market, is a forecast about buyers accepting a trade. DC Market Insights modelled five ways to reject heat from one megawatt (MW) of IT load, meaning the electricity the servers themselves draw. An open-circuit tower paired with a water-cooled chiller costs about $80,000 per MW. It consumes about 9,800 cubic meters of water a year and has the lowest fan and pump energy. A hybrid cooler that runs wet only above 25 °C costs about $155,000 and uses 2,500 cubic meters. An adiabatic cooler, which wets its pads only on peak days, costs about $165,000 and uses 1,000 cubic meters. Both are rated medium on fan and pump energy.
Scaled up, the trade is easy to see. For a hypothetical 100 MW hall, the report’s figures imply roughly $8 million of open-tower equipment against $15.5 million for hybrid units. The hybrid units would save around 730,000 cubic meters of water a year. They would also draw more power for fans and pumps on the days they run dry. The report’s water figure for open designs matches the benchmark it attributes to NVIDIA: about 2.6 million gallons per MW a year for conventional evaporative cooling.
Who carries the cost depends on which constraint binds. Report author Amit Jain says AI campuses “capped by their grid connection still value the low fan and compressor power of evaporative heat rejection.” On those sites, every kilowatt spent on cooling fans is a kilowatt unavailable for servers. A hybrid cooler is therefore a decision to spend scarce power and extra capital to buy regulatory headroom on water. The 12.39% forecast assumes many operators will make that decision. The report does not, however, put a kilowatt-hour figure on the power penalty.
Evaporative Cooling Shrinks in Share but Grows in Megawatts
The forecast is not a story of water-based cooling disappearing. DC Market Insights models the evaporative share of new data center capacity falling from 45.4% in 2025 to 31.4% in 2035. Its share of new AI capacity falls from 48% to 30%. Over the same period, total new capacity more than doubles, from 12,000 MW to 27,000 MW a year. As a result, evaporative-served new capacity still rises about 55%, from 5,448 MW to 8,467 MW a year.
Geography explains part of that resilience. The report argues evaporative towers keep their edge where grid power rather than water is the binding constraint, naming the United States, India and Southeast Asia. Supplier moves it cites fit that map. SPX Technologies, owner of the Marley brand, raised its estimated annual data center revenue capacity to about $1.1 billion in July 2026. Baltimore Aircoil Company opened its first Latin American plant near Monterrey, Mexico, in May 2026. EVAPCO announced an Indian subsidiary in August 2026. The report credits these three firms with about half the market. It also forecasts Latin America as the fastest-growing region, at 11.99% a year, and India as the fastest-growing large country, at 14.82%.
The Installed Base Becomes the Business
The most durable revenue in the forecast may not be new equipment. In the report’s model, the evaporative-served installed base grows from 55,680 MW of IT load to 124,400 MW. Each megawatt carries a maintenance contract worth about $3,500 a year in 2025, rising to $4,200 by 2035. Each also faces periodic rebuilds of fill, fans and gearboxes. Service and maintenance grows 10.36% a year, and replacement and rebuilds grow 9.77%. New-build equipment grows 6.77%.
That pattern recurs across the firm’s recent work. Its green data center report, released October 16, projects retrofit spending of $18.41 billion by 2035. Its fire detection and suppression report, released the same day, also points to a growing recurring pool in inspection, testing and maintenance. For investors, the cooling tower forecast fits a broader thesis that AI infrastructure is creating aftermarket revenue alongside new construction. Jain’s claim that suppliers able to retrofit an existing tower to cut water by 75% to 90% are “best placed for the next decade” follows from that model. It is an analyst’s judgment, not a measured outcome.
Dry Coolers Set the Ceiling
The largest risk to these numbers is a design that sits outside the market entirely. Dry coolers use no water and pair with liquid-cooled racks that accept 45 °C coolant. They cost about $208,000 per MW, roughly 2.6 times an open tower, and draw the most fan power on hot days. The report cites an October 2026 order for more than 1,000 dry coolers providing 5 GW of AI heat rejection. That single order is close to the 5,448 MW of evaporative-served capacity the firm expects the whole industry to add in 2025.
DC Market Insights quantifies this downside scenario. If AI halls adopt chiller-less dry cooling faster, the evaporative share of new AI capacity falls to 20% rather than 30% in 2035. The market would then reach $2.03 billion instead of $2.44 billion. The gap between those two figures shows how much of the forecast depends on one assumption about how fast liquid cooling and dry coolers arrive.
Background
Data centers turn nearly all the electricity they consume into heat, which must be removed continuously. For decades, large facilities have used evaporative cooling towers, open-circuit or closed-circuit, because evaporation moves heat with very little fan and compressor power. The cost is water. According to DC Market Insights, the market grew 14.77% a year from 2020 to 2025, as new data center IT capacity doubled from 6,000 MW to 12,000 MW a year.
Two developments now complicate that model. AI chips are increasingly cooled by liquid delivered directly to the processor, and loops that run at 45 °C can reject heat through dry coolers with no evaporation at all. Meanwhile, the European Union, California and Utah have adopted rules requiring data center water use to be disclosed. In the report, hyperscale and AI data centers already account for 48.0% of cooling tower spending and grow 10.50% a year. Enterprise and edge sites grow only 0.83% a year, as smaller server rooms move to colocation and cloud. Source: Data Center Cooling Tower Market to Reach USD 2.44 Billion by 2035 as Water Rules Push Hybrid and Adiabatic Coolers – DC Market Insights, a PR Newswire release dated October 19, 2026 announcing the firm’s 2026-2035 forecast. Primary sources: Green Data Center Market to Reach USD 90.38 Billion by 2035 as AI Density Accelerates Liquid Cooling, Power Efficiency and Retrofit Spending – DC Market Insights (PR Newswire, October 16, 2026); Data Center Fire Detection and Suppression Market to Reach USD 10.35 Billion by 2035 as Battery and AI Risks Drive Protection Upgrades – DC Market Insights (PR Newswire, October 16, 2026).Sources