The 45% Tariff Impact: Quantifying Supply Chain Bottlenecks in the AI DataCenter Cooling Market

Part 2 of 3: The Critical Intelligence Series for AI Infrastructure Investors

This is the second in a three-part series examining investment opportunities in AI infrastructure. In Part 1, we explored power infrastructure constraints and opportunities, revealing how the race for gigawatt-scale energy resources is reshaping the competitive landscape. Today we focus on cooling technology bottlenecks, while our final instalment will cover stealth deployment strategies and hidden supply chains in AI infrastructure.

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While the AI industry obsesses over model parameters and token pricing, a critical supply chain crisis is unfolding beneath the surface. The implementation of Trump's 45% reciprocal tariffs on cooling components has created unprecedented disruption in the AI cooling technology market – a disruption that threatens deployment timelines for even the most well-funded AI infrastructure projects.

For investors allocating capital in the AI ecosystem, understanding the hidden dynamics of cooling technology has become essential. The companies that secure access to critical cooling components and develop tariff-resilient supply chains will accelerate their AI deployments, while those that fail to solve the cooling equation may find themselves unable to deploy competitive infrastructure regardless of their chip allocations or funding levels.

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How We Got to the 45% Number

The headline 45 % duty on AI-cooling hardware and fluids is simply the sum of two layers in the April 2025 Reciprocal Tariff Order: a universal 10 % baseline that now applies to every import, plus a country-specific ‘reciprocal adjustment’ of roughly 35 % on goods sourced from China (and several other high-deficit partners).

Because the vast majority of immersion tanks, CDU pump sets, and dielectric fluids still originate wholly or in key sub-assemblies from Chinese factories, those items incur the full (10 % + 35 %) combination at the U.S. border, yielding an effective 45 % landed duty.

Existing Section 301 and 232 measures are effectively folded into that 35 % add-on for China, so most cooling SKUs now clear customs with a clean 45 % surcharge unless vendors reroute final assembly or fluid blending through tariff-exempt USMCA hubs such as Mexico or Canada.

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The Liquid Cooling Revolution: From Niche to Necessity

The thermal demands of AI accelerators have triggered a paradigm shift in cooling technology. What was once a niche approach has become an absolute requirement for next-generation AI infrastructure:

• Immersion cooling tanks are shipping at 600+ units monthly with projections to reach 1,200+ units monthly by Q3 2025, enabling previously impossible rack densities between 50-368kW

• Direct-to-chip cold plates are shipping at 800+ units monthly, primarily to Silicon Valley test beds and Singapore AI hubs, with projections exceeding 2,000 units per month by mid-2026

• Coolant distribution units from companies like Nortek are shipping at 850 units monthly to Northern Virginia and Phoenix, creating a secondary market with 30-40% markups due to supply constraints

These aren't incremental improvements - they represent a fundamental enabling technology for next-generation AI. Without these cooling solutions, the computational densities required for frontier AI models would be physically impossible to achieve.

The Cooling Supply Chain Crisis

Our intelligence reveals a critical and largely undisclosed supply chain bottleneck around cooling components essential for AI infrastructure:

Dielectric Fluid: The Hidden Strategic Resource

The most severe constraint centers on specialized dielectric fluids required for immersion cooling:

• Monthly demand forecast exceeds 500,000 liters and is growing at 28% quarter-over-quarter

• The 45% tariff (up from 25%) impacts more than 80% of current U.S. supply, creating immediate shortages

• Companies are responding with aggressive stockpiling, with Vertiv reportedly securing a six-month supply of Shell's Galden HT-270

• Microsoft is negotiating direct contracts with Mexico's Querétaro Fluid Hub to bypass tariffs, while 3M is deploying PFAS-free Novec 7100 under an "essential use" exemption

The scale of dielectric fluid demand suggests a significantly larger immersion cooling market than publicly acknowledged. This volume, combined with evidence of long-term off-take agreements for fluids like Cargill's FR3™, indicates companies are securing multi-year supply guarantees to protect deployment plans.

Critical Component Shortages

Beyond dielectric fluids, several critical components face emerging supply constraints:

• Cold Plate Materials: Copper/nickel alloy shortages for direct-to-chip cold plates, with hyperscalers maintaining only 8-10 week supplies

• Stainless Steel: Demand for 500-series stainless steel for immersion tanks creating material shortages, affecting tank manufacturing capacity

• Variable Speed Drives: Anticipated shortages for coolant distribution units threaten to constrain deployment of hybrid cooling solutions

• Thermal Interface Materials: Shortages emerging for materials supporting NVIDIA's GB200 processors, creating a potential bottleneck for next-generation deployments

These constraints are driving vertical integration efforts. Nortek has integrated heat exchanger production, while strategic partnerships between chip manufacturers and cooling technology vendors are forming to secure supply chains.

The Underground Secondary Market

Perhaps most revealing is the emergence of vibrant secondary markets for cooling components, exposing both supply limitations and strategic adaptation:

• Used immersion cooling equipment is gaining aftermarket value as early adopters upgrade

• A secondary market for retrofit kits enabling direct-to-chip cooling implementation in existing infrastructure

• Emerging secondary markets for liquid CDUs with 30-40% markups to bypass supply constraints

The existence of these markets with their significant price premiums signals a fundamental supply-demand imbalance that official channels cannot resolve. When 30-40% markups become acceptable to bypass supply constraints, it indicates not just scarcity but urgency with companies willing to pay substantial premiums to avoid delays in AI infrastructure deployment.

Geographic Deployment Patterns and Climate Adaptations

Cooling technology deployment shows distinct regional specialization, with solutions optimized for specific climate conditions and regulatory environments:

• High-temperature fluid coolers from companies like Shenlong, LiquidStack, and ZutaCore are enabling operation in ambient conditions up to 45°C, making deployments viable in regions previously considered unsuitable

• Chilldyne's negative pressure liquid cooling is positioned as "critical for tropical region deployments," where conventional cooling faces efficiency challenges

• The Sustainable Tropical Data Centre Testbed (STDCT) in Singapore is driving specialized solutions with 40% energy reduction targets

These climate-adapted technologies are enabling geographic expansion of AI infrastructure into previously challenging regions, particularly the Middle East, North Africa, and Southeast Asia. This represents a significant shift in the global computing landscape, potentially redistributing AI computational capacity toward energy-rich regions with previously inhospitable climates.

Covert Testing and Regional Hubs

Evidence suggests several undisclosed testing facilities and deployment hubs for advanced cooling technologies:

• Northern Virginia appears to be home to undisclosed testing facilities for immersion cooling, facing significant impact from the 45% tariff on dielectric fluids

• Singapore is emerging as a key testbed for advanced cooling with multiple technology types being shipped there, including direct-to-chip cold plates and dielectric coolant concentrates

• An undisclosed "Tokyo-3 cluster" is targeted for two-phase immersion cooling manifolds, suggesting a significant AI infrastructure hub not widely publicized

These covert testing facilities often precede major deployment announcements by 12-18 months and suggest more aggressive adoption timelines than publicly acknowledged. The concentration of testing in specific regions like Singapore indicates potential coordination between multiple hyperscalers, likely through industry consortia or standards groups.

Cross-Border Manufacturing Arrangements

Evidence points to cross-border manufacturing arrangements designed to circumvent cooling component tariffs:

• Direct-to-chip cold plates are being sourced from "Southeast Asian OEMs" and "European specialty manufacturers" rather than traditional U.S. suppliers

• NVIDIA re-routing GPU board assembly through Malaysia (0% under USMCA)

• Equinix shifting immersion tank orders to Mexico (25% cost premium vs 45% tariff)

These cross-border arrangements reflect strategic adaptations to tariff pressures, with companies leveraging international manufacturing networks to optimize costs. The pattern suggests an acceleration of existing geographical diversification strategies, potentially reshaping the global supply chain for cooling infrastructure.

Tariff-Driven Production Shifts

The April 2025 Trump reciprocal tariffs are accelerating domestic production of cooling components, but with significant timeline gaps.

These tariffs are creating significant first-mover advantages for companies that secured supplies before implementation. The differential tariff rates with higher percentages on cooling materials than on finished chips suggests a strategic policy goal of developing domestic cooling component manufacturing while maintaining access to advanced semiconductors.

Investment Implications: The Cooling Technology Alpha Opportunity

For investors, these trends create both significant opportunities and risks:

Alpha Opportunities

1. Domestic Cooling Manufacturers: Companies like Dow and Materion are positioned for significant growth as tariffs drive demand for domestic alternatives, with 6-9 month advantages over foreign competitors.

2. USMCA Manufacturing Hubs: Mexican cooling system manufacturers are seeing surge demand as companies shift production to avoid tariffs while maintaining proximity to US markets.

3. Bio-Based Coolant Developers: Companies developing bio-based alternatives to traditional dielectric fluids are seeing accelerated adoption as environmental regulations and tariffs create a perfect storm for innovation.

4. Secondary Market Specialists: Companies that can source, refurbish, and redistribute used cooling equipment are capturing significant margins in the supply-constrained environment.

5. Climate-Adaptive Cooling Technologies: Firms developing solutions for high-temperature environments are unlocking entirely new geographic markets for AI deployment.

Risk Factors

1. Supply Chain Fragility: Companies without secured cooling component supplies face 6-18 month delays in AI infrastructure deployment regardless of chip availability.

2. Tariff Navigation Complexity: Organizations without sophisticated supply chain operations face significant cost disadvantages compared to competitors with cross-border manufacturing capabilities.

3. Technical Integration Challenges: The shift to liquid cooling requires fundamental redesign of server architecture, creating potential compatibility issues and deployment delays.

4. Regional Concentration Risk: The emergence of specialized cooling technology hubs creates vulnerability to regional disruptions, with Singapore's position as a key testbed particularly notable.

Conclusion: The Strategic Imperative of Cooling Mastery

The evidence is clear: cooling technology has evolved from a support function to a strategic capability directly impacting AI computing performance. Organizations that master advanced cooling can deploy higher-density AI clusters, potentially gaining significant advantages in training large models.

For investors, this creates both urgency and opportunity. Understanding the hidden dynamics of cooling technology acquisition, the strategic significance of tariff navigation, and the emerging geographic corridors is essential for making informed allocation decisions in the AI infrastructure space.

In our next instalment, we'll examine the stealth deployment strategies creating both constraints and opportunities in the AI infrastructure landscape. We'll reveal how concealed ownership structures, regulatory classification arbitrage, and adaptive inventory networks are reshaping how and where AI compute is deployed.

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This analysis is based on Persevera AI's AI DataCenter Signals Intelligence service, which provides investment firms and other AI Infrastructure stakeholders with detailed analysis of emerging trends, hidden opportunities, and strategic risks in AI infrastructure. Our intelligence reveals critical opportunities and risks hidden from standard market analysis, giving investors the asymmetric information advantage needed to identify emerging trends, make superior investment decisions, and generate alpha in the rapidly evolving AI infrastructure landscape.

To request the full intelligence package, including our complete analysis of power infrastructure trends, cooling technology bottlenecks, and stealth deployment strategies, visit https://persevera.ai/ai-datacenter-signals-intelligence or contact our team directly.