Cooling Systems Are Becoming a Critical Component in AI Data Centers

Key Points

Artificial intelligence (AI) is a significant trend on Wall Street and Main Street, but at its core, it is simply a complex software program. This reality has broader business implications that extend beyond the technology sector. A major impact has been the surge in electricity demand needed to power newly constructed AI data centers.

U.S. electricity demand increased by 10% between 2005 and 2025 and is projected to grow 60% from 2025 to 2045, partly fueled by AI. This represents a substantial shift in energy consumption patterns and underscores the strength of the AI trend for traditional industries. It also creates opportunities for a critical supporting technology—cooling systems. Below, we explore why Trane Technologies and Carrier Worldwide are experiencing record performance driven by this essential market dynamic.

Image source: Getty Images.

Data Centers Generate Intense Heat Due to High-Power Computing

Anyone who has placed a laptop on their lap while in use understands how much heat computers produce. While this is manageable for individual consumer devices, AI applications do not run on personal machines. Instead, they operate on specialized high-performance computing servers. These processors consume enormous amounts of power, making reliable access to electricity a critical constraint for AI development.

AI does not function on isolated machines or individual chips. It operates within data centers—massive facilities housing thousands of high-powered servers. The energy consumption of these buildings is so substantial that Elon Musk developed his own power generation facility to support Space Exploration Corporation’s Colossus I and Colossus II data centers.

Each high-performance server generates considerable heat. The importance of thermal management is evident in Musk’s proposal to construct data centers in space. While innovative, the planet still relies on ground-based data centers, which are significantly increasing the demand for cooling solutions. Companies like Trane Technologies and Carrier Worldwide are well-positioned to meet this rising need.

Trane and Carrier Report Record Order Backlogs

In its second-quarter 2026 earnings report, Trane Technologies announced a 9% increase in organic revenue and an 11% rise in adjusted earnings—strong indicators of health for an industrial firm. However, the standout figure was a record-breaking $12.1 billion order backlog, representing a 70% year-over-year increase. Much of this growth stems from its commercial division, which supplies cooling systems to data centers. The company’s book-to-bill ratio reached 135%, indicating that new orders are arriving faster than current contracts can be fulfilled.

Order backlogs serve as a strong indicator of future sales activity, reflecting work that has been secured but not yet completed. Trane’s unprecedented backlog demonstrates its ability to leverage growing demand for data center cooling technologies. Carrier is experiencing similar momentum.

Carrier’s second-quarter 2026 fiscal results showed a 3% increase in organic revenue, though adjusted earnings declined by 7%. Despite weaker earnings, the company also achieved a record-breaking backlog of $8 billion—an increase of 40% year-over-year and 20% compared to the previous quarter. This growth reflects the escalating appetite for cooling infrastructure as AI investments intensify.

Additional details reveal further strength: Carrier’s total orders rose 40% year-over-year, commercial segment orders climbed 65%, and orders specifically from data centers soared 300%. Clearly, the primary driver of Carrier’s expanding backlog is the surging requirement for advanced cooling systems in AI-powered data centers. Like Trane, Carrier’s robust backlog positions it favorably for sustained growth.

Strong Potential Offset by Elevated Valuations

The outlook for Trane and Carrier remains highly favorable, driven by the expanding role of cooling infrastructure in supporting AI operations. However, investor sentiment has already begun to reflect this optimism, with valuation multiples for both companies exceeding their historical averages.

At current levels, only aggressive growth-focused investors may find these stocks appealing. Nonetheless, those who view AI as a transformative force may see long-term value in the infrastructure plays that enable its progression.

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