This L.A. startup is using rocket science to cool data centers with less power and water

As the artificial intelligence industry heats up, Karman Industries is trying to cool it down.

Startup Signal Hill says it has developed a cooling system that uses SpaceX rocket engine technology to limit the environmental impact of data centers, cooling them with less space, less energy and without water.

It recently raised $20 million and plans to begin building its first compressors in Long Beach later this year.

“Our high-level thesis is that we could build the best compressor on the market using the latest and greatest technology,” said David Tease, managing director of Karman. “We want to reduce cooling power consumption so that you have the most efficient way to cool these chips.”

The high-end, expensive chips that power AI can slow down or shut down if they overheat. They can reach over 200 degrees, but need to be below 150 degrees to work best.

Cold storage warehouses filled with tens of thousands of them can require fields full of equipment and huge amounts of water.

Karman developed a cooling system similar to the heat pumps in an average home, except its pumps use liquid carbon dioxide as a refrigerant, which circulates using rocket engine technology rather than fans. The company’s efficient pumps can reduce the space required for data center cooling equipment by 80%.

Over the years, data centers have used fans and air conditioning to blow cold air over chips. Larger installations pass cold liquid through tubes located near the chips to absorb heat. This hot liquid is sent outside to a cooling zone, where vast networks of pipes use as much water as a city of 50,000 people to remove the heat.

A 50-megawatt data center also uses enough electricity to power a medium-sized city.

As AI has larger data centers, adding more and more chips, it has needed more and more space and power for cooling.

“It’s kind of a losing battle, especially when you keep densifying your tokens,” Tease said.

Cooling systems account for up to 40% of a data center’s power consumption, and an average-sized data center consumes more than 35,000 gallons of water per day.

Nearly 100 gigawatts of new data center capacity will be added by 2030 and energy constraints have become the main barrier to expansion. U.S. data centers will consume about 8% of all the country’s electricity by 2030, according to the International Energy Agency.

Communities across the United States have begun protesting the construction of data centers, fearing that the need for electricity and water will strain infrastructure and increase costs for consumers. Cooling systems are expected to use up to 33 billion gallons of water by 2028 per year.

Big tech companies and venture capitalists are spending billions of dollars to replace old technologies with energy-efficient solutions. Microsoft announced a new data center design that uses no water for cooling. The company recently committed to ensuring that its data centers do not increase electricity costs or deprive neighboring communities of water.

The data center cooling market is expected to grow from approximately $11 billion in 2025 to nearly $25 billion by 2032.

To serve this seemingly insatiable market, Karman developed a rotary compressor that spins at 30,000 revolutions per minute – nearly 10 times faster than traditional compressors – to move heat.

“Three or four years ago, it was very difficult to achieve simply because the engines didn’t exist. Automotive components are reaching these speeds,” said Chiranjeev Kalra, co-founder and chief technology officer of Karman.

About a third of the 23 people on Karman’s team came from SpaceX or Rocket Lab, and they co-opted technologies from aerospace engineering and electric vehicles to design the mechanics of high-speed motors.

The system uses a special type of carbon dioxide under high pressure to transfer heat from the data center to the outside air. Depending on conditions, it can perform the same amount of cooling using less than half the energy.

Karman’s heat pump can either reject heat into the air, or direct it for additional cooling, or even for electricity generation.

One of the main selling points of these systems is that they do not require water, which will allow data centers to be created in locations where water is scarce.

In very hot places like Texas and Arizona, cooling systems struggle, either using too much water to cool or having to throttle the chips to keep them from overheating.

Karman’s latest funding round brings the total amount raised to over $30 million. Key attendees included Riot Venture, Sunflower Capital, Space VC, Wonder Ventures, and former Intel and VMware CEO Pat Gelsinger.

Karman said it will begin deliveries to customers in summer 2026 from its Los Angeles manufacturing plant, designed to make 100 units per year. The plan is to eventually quadruple capacity.

If successful, Karman could reduce the market share of Trane Technologies and Schneider Electric, the leaders in heat rejection systems.