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Is Space the Final Frontier for Data Centers?
Nvidia and Elon Musk say orbital facilities could ease power, water, and cooling constraints
As residential HVAC sales continue to crater, commercial HVAC has emerged as one of the industry’s bright spots -- particularly data centers. For many equipment manufacturers, hyperscale and colocation projects are not just offsetting residential weakness, they are a primary driver of growth and investment. Yet rising concerns over power use, permitting, and cooling are beginning to complicate that growth, leading some to consider whether future data centers may not be built on Earth at all.
Despite those concerns, companies, including Carrier, remain optimistic, and CEO Dave Gitlin has been vocal about the positive role data centers are playing in the business. On the company’s Q4 earnings call, he said reaching “around $1 billion” in data center revenue in 2025 marked a key milestone, reflecting multiyear investments that are now paying off. Those investments, he said, position Carrier “to outgrow the commercial HVAC market,” with 2026 guidance calling for “double-digit revenue growth,” including data center revenue rising about 50% to roughly $1.5 billion. Gitlin expressed confidence that the “phenomenal” data center orders seen in the fourth quarter of 2025 will carry into 2026, noting that January “has been good” and adding, “we feel very well positioned” as deliveries ramp up later in the year.
Trane Technologies told a similarly bullish story on its Q4 earnings call. According to CEO Dave Regnery, data centers are not a short-cycle trend but a durable vertical that has supported the company for years — and will continue to do so. “We’ve been very strong in the data center vertical for decades, and we’re going to be very strong in the future.”
But clouds may be forming on the horizon. Chipmaker Nvidia recently announced that its new Vera Rubin system can be cooled without traditional chilled water systems — a revelation that initially sent shares of major HVAC manufacturers sharply lower. According to Nvidia’s website, the Vera Rubin NVL72 systems use warm-water, single-phase direct liquid cooling with a 45°C supply temperature. This means that data centers can cool water with ambient air, translating to power savings compared to solutions that use 35°C liquid cooling.
Investors interpreted this as a sign that one of HVAC’s most robust growth markets — data center cooling — could shrink if systems rely less on water- and/or air-cooled chillers. However, both Carrier and Trane reject the notion that next-generation computing will sideline traditional thermal management. Regnery said he has “not seen a reference design or data center of the future that does not include chillers.”
Gitlin added that data centers will always require a combination of liquid and traditional cooling, and Carrier is confident that Nvidia agrees with that. “If you look at the Blackwell chip and the new Vera Rubin chip, they both have similar thermal profiles. They're both designed to operate up to 55°C, so both need some form of cooling. The Vera Rubin chips will be more efficient and deliver a lot more output, but the input temperature will be about the same, and that power translates directly into heat. So both designs require the same amount of heat dissipation.”
While the Vera Rubin system is unlikely to spell the end of HVAC demand, a growing backlash against data centers could pose a more significant challenge. States such as New York are now considering temporary moratoriums on new data center construction, citing concerns over energy demand, grid strain, and environmental impact. One proposal would impose a three-year pause on new projects amid fears that rapid growth could overwhelm utilities and drive up costs for residents and businesses.
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Across the U.S., cities and municipalities are taking a closer look at the local impacts of large-scale data centers, including their significant electricity and water demands. In my backyard of Chandler, Arizona, for example, the City Council recently rejected a major AI data center proposal after heated public debate, highlighting how local sentiment is increasingly a factor in where — or whether — data centers get built.
There is little doubt, however, that data centers will continue to be built as demand for AI grows. But if resistance from local communities intensifies, then Elon Musk proposes an alternative: building them in outer space. In a recent podcast, Musk announced an ambitious goal of launching a million solar-powered AI data centers into orbit, stating that “It’s always sunny in space.” He predicts that outer space will be the cheapest place to put AI data centers, and he expects to launch an “orbital data center” in 30 to 36 months.
Musk is not alone. Starcloud — a startup backed by Nvidia’s Inception program — is also working on orbiting data centers that could dramatically reduce the need for infrastructure down here on Earth. According to the company, space-based data centers would “leverage 24/7 solar energy and radiative cooling,” allowing them to scale rapidly to gigawatt-level capacity while avoiding the permitting constraints faced on Earth. In a blog, Starcloud said that instead of relying on fresh water and evaporative cooling towers, its space-based data centers would use the vacuum of deep space as an “infinite heat sink” -- an approach the company claims could reduce energy costs by as much as tenfold.
If these extraterrestrial facilities ever get off the ground, HVAC’s future could literally be up in the air.
