Effectively managing the degree of rack density involves tackling the critical issue of cooling, which directly influences the design of a data center.

Most high-density racks can only function with the help of liquid cooling technologies because conventional air-cooled methods in existing data centers often fall short in efficiently handling the heat generated by high-performance AI chips.

However, a majority of data centers lack the liquid delivery systems or mechanisms necessary for liquid cooling, says Duncan. “There are also lingering concerns around the storage and transportation of the cooling liquids used.”

Still relatively nascent, liquid cooling is widely considered a more energy-efficient alternative to air cooling. For instance, a new liquid immersion cooling system, developed by Mitsubishi Heavy Industries, reduced the energy consumption for cooling by 92% in a data center operated by Japanese telecommunications giant NTT.

“Retrofitting existing data centers to integrate liquid cooling also may not be as straightforward, or as financially viable, compared to constructing purpose-built AI data centers from the ground up,” Chua says.

Another major barrier hindering adoption is the issue of maintenance. “In most cases, liquid cooling poses a challenge for the concurrent maintainability of the server racks as they must be powered off and removed during the process,” says Chua.

As rack densities grow further, however, the adoption of liquid cooling as the main solution over air cooling has become “inevitable”, Chua says. “It’s still the most energy-efficient and viable alternative to cool the servers effectively.”

The emphasis on efficient energy usage comes amid mounting pressure on data centers to adhere to more stringent environmental, social and governance (ESG) regulations.

In Australia, for instance, data center providers pursuing government contracts must have a five-star National Australian Built Environment Rating System (NABERS) rating, and a target power usage effectiveness (PUE) below 1.4.

The German government recently approved legislation requiring data centers opening from July 2026 to achieve a PUE of 1.2, and to implement measures to reuse at least 20% of their waste heat by 2028.

“Regulations around data centers will continue to build out in every country, be it on ESG or other aspects like data privacy and data sovereignty,” says Duncan. “Countries that are lagging behind on legislation will have to catch up eventually.”