January 1, 2026
January 2026 Update: LG Electronics signed a multi-billion dollar annual agreement to supply vertically integrated cooling solutions for Microsoft's global AI data centers. The deal covers cold plates, coolant distribution units (CDUs), and water-cooled chillers—signaling liquid cooling's transition from specialty technology to hyperscale standard.
TL;DR
The LG-Microsoft deal marks liquid cooling's arrival as default infrastructure for AI data centers. Microsoft's $80B AI data center commitment requires cooling technology that air-based systems cannot deliver. LG's vertically integrated approach—covering everything from chip-level cold plates to facility chillers—provides a single-vendor solution for the full thermal stack. With global AIDC infrastructure projected to grow from $236B to $934B by 2030, cooling becomes a defining constraint and opportunity.
What Happened
In December 2025, LG Electronics signed a multi-billion dollar annual agreement to supply cooling infrastructure for Microsoft's next-generation AI data centers globally.1
Deal structure:
| Component | LG Product | Function |
|---|---|---|
| Cold plates | Direct-to-chip liquid cooling | GPU/CPU heat capture |
| CDUs | Coolant distribution units | Heat transfer management |
| Chillers | Water-cooled centrifugal | Facility-level cooling |
LG supplies these components through its subsidiaries LG Electronics and LG Energy Solution, creating a vertically integrated thermal management stack.2
The agreement builds on LG's July 2025 establishment of the AI Data Center HVAC Solution Lab—a dedicated testbed for validating cooling solutions under real-world AI workloads.3
Why It Matters
Microsoft's $80B AI Infrastructure Needs Liquid Cooling
Microsoft's 2025 AI data center commitments drive the cooling requirement:4
| Microsoft AI Investment | Amount |
|---|---|
| 2025 AI data center capex | $80B |
| NVIDIA joint venture | $30B |
| Anthropic cloud deal | $30B |
| Azure AI expansion | Ongoing |
Air cooling cannot handle modern AI hardware densities. GB200-NVL72 racks draw 120+ kW—beyond air cooling's practical limits.5
Liquid Cooling Becomes Default
The LG-Microsoft deal signals a market transition:6
| Year | Liquid Cooling Share | Catalyst |
|---|---|---|
| 2023 | ~15% | Early adopters |
| 2024 | ~30% | H100 deployments |
| 2025 | 46% | GB200 standard |
| 2026+ | 60%+ projected | AI infrastructure default |
Why now: - GPU thermal density exceeds 1,000W per chip (GB200) - Rack densities reach 120+ kW (vs 20-30 kW traditional) - PUE requirements push below 1.2 (liquid achieves 1.03-1.1) - Water constraints favor closed-loop liquid systems
Vertically Integrated Approach
LG's end-to-end solution addresses fragmentation in cooling supply chains:7
Traditional approach (multiple vendors): - Cold plates: Vendor A - CDUs: Vendor B - Chillers: Vendor C - Integration: Customer responsibility
LG approach (single vendor): - Cold plates: LG - CDUs: LG - Chillers: LG - Integration: LG Solution Lab validated
For hyperscalers deploying millions of GPUs, single-vendor accountability reduces complexity and risk.
Technical Details
LG Cooling Portfolio
LG's data center cooling stack, debuted at Data Center World 2025:8
| Product | Technology | Capacity |
|---|---|---|
| Direct liquid cooling | Cold plates + CDUs | GPU/CPU level |
| Water-cooled chillers | Oil-free centrifugal | Facility level |
| Rear door heat exchangers | Hybrid air/liquid | Rack level |
| Control systems | Integrated management | System-wide |
Performance Metrics
Liquid cooling delivers substantial efficiency improvements:9
| Metric | Air Cooling | Liquid Cooling | Improvement |
|---|---|---|---|
| PUE | 1.4-1.6 | 1.03-1.2 | 25-40% |
| Max rack density | 30-40 kW | 120+ kW | 3-4x |
| Water usage | High (evaporative) | Low (closed loop) | 80% reduction |
| Footprint per kW | Large | Compact | 50% reduction |
LG's Partnership Ecosystem
LG builds on multiple partnerships for comprehensive capability:10
| Partner | Focus | Announced |
|---|---|---|
| Microsoft | Hyperscale AI DCs | Dec 2025 |
| SK Enmove + GRC | Liquid immersion | Oct 2025 |
| Various OEMs | Server integration | Ongoing |
The SK Enmove and GRC partnership specifically advances two-phase immersion cooling for extreme density applications.
Market Context
Global AIDC Infrastructure Growth
The cooling opportunity reflects broader market expansion:11
| Year | AIDC Infrastructure Market |
|---|---|
| 2025 | $236.4B |
| 2030 | $933.7B (projected) |
| CAGR | ~32% |
Cooling represents approximately 15-20% of data center infrastructure cost, implying a $140-190B cooling market by 2030.
Competitive Landscape
LG competes with established cooling vendors:12
| Vendor | Strength | Focus |
|---|---|---|
| LG Electronics | Vertical integration | Hyperscale partnerships |
| Vertiv | Broad portfolio | Colo + enterprise |
| Schneider Electric | Power + cooling | Integrated solutions |
| Submer | Immersion specialist | Two-phase systems |
| CoolIT | CDU pioneer | Direct liquid cooling |
| Asetek | Gaming heritage | Server liquid cooling |
LG's advantage: conglomerate resources (LG Chem for materials, LG Energy Solution for thermal management expertise) enable full-stack capability.
Infrastructure Implications
For Data Center Operators
The LG-Microsoft model suggests cooling strategy shifts:13
Near-term: - Evaluate liquid cooling for new AI deployments - Single-vendor solutions reduce integration risk - Plan for 100+ kW rack densities
Medium-term: - Retrofit strategies for existing facilities - Hybrid air/liquid transition paths - Closed-loop systems for water-constrained sites
For Cooling Vendors
Market dynamics favor:14
- Hyperscale partnerships (follow LG model)
- Vertical integration (cold plate to chiller)
- Validation facilities (proof-of-concept critical)
- OEM relationships (server vendor integration)
Adoption Barriers Declining
Key barriers are falling:15
| Barrier | 2023 Status | 2025 Status |
|---|---|---|
| Cost premium | 30-50% | 10-20% |
| Reliability concerns | High | Addressed |
| Maintenance complexity | Uncertain | Proven |
| Staff training | Limited | Expanding |
| Vendor ecosystem | Fragmented | Consolidating |
What's Next
2026 Projections
- LG begins major Microsoft deployments
- Additional hyperscaler liquid cooling deals likely
- Immersion cooling pilots expand
- OEM pre-integration becomes standard
Technology Evolution
- Higher-density cold plates (2,000W+ per chip)
- Dielectric immersion at scale
- AI-optimized thermal management
- Heat reuse (district heating integration)
For AI data center cooling infrastructure deployment, contact Introl.
References
-
EnkiAI. "LG's 2025 AI Data Center Cooling Dominance Revealed." December 2025. https://enkiai.com/ai-market-intelligence/lgs-2025-ai-data-center-cooling-dominance-revealed ↩
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DataCenterDynamics. "Microsoft to use LG Electronics cooling infrastructure in some AI data centers." December 2025. https://www.datacenterdynamics.com/en/news/microsoft-to-use-lg-electronics-cooling-infrastructure-in-some-ai-data-centers/ ↩
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AInvest. "LG Group's Strategic AI Data Center Alliance with Microsoft: A High-Growth Infra Play." December 2025. https://www.ainvest.com/news/lg-group-strategic-ai-data-center-alliance-microsoft-high-growth-infra-play-2512/ ↩
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Korea Herald. "LG, LS pitch all-in-one AI data center infrastructure to Microsoft." December 2025. https://www.koreaherald.com/article/10630676 ↩
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American Bazaar. "LG Electronics and Microsoft partnering up for data centers." December 5, 2025. https://americanbazaaronline.com/2025/12/05/lg-electronics-and-microsoft-partnering-up-for-data-centers-471135/ ↩
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REF Industry. "LG and Microsoft to Collaborate on AI Data Center Cooling." December 2025. https://refindustry.com/news/market-news/lg-and-microsoft-to-collaborate-on-ai-data-center-cooling/ ↩
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PR Newswire. "LG Debuts End-to-End Cooling Solution to Meet Increasing Demands of High-Capacity Data Centers." 2025. https://www.prnewswire.com/news-releases/lg-debuts-end-to-end-cooling-solution-to-meet-increasing-demands-of-high-capacity-data-centers-302428576.html ↩
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LG Global. "LG Releases Third-Quarter 2025 Financial Results." 2025. https://www.lg.com/global/newsroom/news/corporate/lg-releases-third-quarter-2025-financial-results/ ↩
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Data Center Frontier. "Liquid Cooling Comes to a Boil." 2025. https://www.datacenterfrontier.com/cooling/article/55292167/liquid-cooling-comes-to-a-boil-tracking-data-center-investment-innovation-and-infrastructure-at-the-2025-midpoint ↩
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KED Global. "LG Electronics, Microsoft sign strategic partnership on AI agents." January 2025. https://www.kedglobal.com/korean-innovators-at-ces-2025/newsView/ked202501070009 ↩
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MarketsandMarkets. "Global AIDC Infrastructure Market Forecast." 2025. ↩
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Tom's Hardware. "The data center cooling state of play (2025)." December 2025. ↩
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Data Center Frontier. "Tracking Data Center Investment." 2025. ↩
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PR Newswire. "LG End-to-End Cooling Solution." 2025. ↩
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EnkiAI. "LG AI Data Center Cooling Dominance." December 2025. ↩
