Most data centres cool their servers using evaporative cooling: water is run through cooling towers, where it evaporates to draw heat away from the building. It works, but it’s thirsty. A single hyperscale facility can consume three to five million gallons of water per day using this method, with around 30 to 40% of that lost to evaporation rather than returned to the source. In water-stressed regions, that draw has become a flashpoint for local opposition, as Capacity’s recent coverage of Central Texas data centre development has shown.
Waterless cooling covers a growing set of technologies designed to remove that dependency entirely.
How it works
There are two main approaches emerging at scale. The first is closed-loop or “zero-water” air cooling, which rejects heat to ambient air through sensible heat transfer rather than evaporation, eliminating cooling towers and potable water draw. The second is direct-to-chip liquid cooling, where a dielectric fluid boils directly at the chip surface to move heat away without using water at all, sometimes called two-phase cooling.
Who’s building it
Microsoft is the most prominent hyperscaler pursuing this shift. Its zero-water, closed-loop liquid cooling system for AI data centres is designed to save more than 33 million gallons per facility annually, with pilot sites in Phoenix, Arizona and Mt. Pleasant, Wisconsin coming online in 2026, and broader deployment planned from 2027. The trade-off, by Microsoft’s own account, is a nominal increase in annual energy use compared with its evaporative designs.
On the direct-to-chip side, ZutaCore has become one of the sector’s most closely watched vendors. Its two-phase liquid cooling technology runs without water and roughly halves cooling energy use against conventional systems, and the company raised $100 million in June 2026 to scale deployments as AI chip density pushes past what air- and water-based systems were built to handle.
Elsewhere, Edged US opened a 36MW waterless facility in Mesa, Arizona in April 2026, and its second Aurora, Illinois site is designed to save more than 277 million gallons of water annually, supporting rack densities of up to 200kW. Novva Data Centers is deploying water-free cooling across colocation sites in five US states, projecting savings of over 300 million gallons a year. Vertiv, Evolution Data Centres and Bridge Data Centres are also among operators moving toward closed-loop and immersion-based systems.
The catch
Nvidia has staked out the boldest claim yet. The company’s chief sustainability officer has said the water consumption challenge for data centres is “largely solved” following its warm-water cooling announcement. But that framing has drawn pushback. The savings stop at the data centre’s walls: as long as AI data centres continue to run on fossil fuels, a choice tech companies are increasingly making, the broader water story around AI isn’t fixed just by what happens on-site.
That distinction matters for how the industry talks about its environmental footprint. Waterless cooling addresses one visible, locally contentious form of resource consumption, but it doesn’t resolve the energy intensity, emissions, or upstream water use tied to power generation.
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