LG-Microsoft Multi-Billion $ Cooling Deal: Liquid Cooling Goes Mainstream

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:

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

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

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

Performance Metrics

Liquid cooling delivers substantial efficiency improvements:⁹

LG's Partnership Ecosystem

LG builds on multiple partnerships for comprehensive capability:¹⁰

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

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

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

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