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

As the AI ​​industry heats up, Karman Industries is trying to cool it down.

The Signal Hill startup says it has developed a cooling system that uses SpaceX rocket engine technology to curb the environmental impact of data centers, cooling them with less space, less power and no water.

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

“Our high-level thesis is that we can produce the best compressor on the market using the latest and best technology,” said Karman CEO David Tearse. “We want to reduce the electricity consumption of cooling so that you have the most efficient way to cool these chips.”

High-end, expensive chips that power AI can slow down or shut down when they overheat. They can reach temperatures of more than 200 degrees, but they need to be below 150 degrees to function at their best.

It can require tens of thousands of cooling tanks, areas full of equipment, and large amounts of water.

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

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

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

As AI has super-sized data centers adding more and more chips, it has needed increasing amounts of space and power for cooling.

“This seems like a losing battle, especially when you keep concentrating your chips,” Tearse said.

Cooling systems account for up to 40% of a data center’s power consumption, and the average midsize data center accounts for 40% of that consumption. More than 35,000 gallons water per day.

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

Communities across the U.S. have begun protesting data center construction out of fear that electricity and water needs could strain infrastructure and increase costs for consumers. Cooling systems are predicted to use up to 33 billion gallons of water annually by 2028.

Big tech companies and venture capital investors are spending billions of dollars to replace old-school technologies with energy-efficient solutions. Microsoft announced a new data center design that uses zero water for cooling. He recently pledged to ensure data centers don’t increase electricity costs or take away water from nearby communities.

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

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

“Three or four years ago, it was very difficult to do this because engines were not available. Automotive components are reaching these speeds,” said Chiranjeev Kalra, Karman’s co-founder and chief technology officer.

About a third of Karman’s 23-person team came from SpaceX or Rocket Lab, and they used technologies from aerospace engineering and electric vehicles to design the mechanics of high-speed engines.

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

Karman’s heat pump can transfer heat to air or direct it towards extra cooling or even energy production.

One of the most potentially desirable points of the systems is that they do not require water, which will allow the establishment of data centers in places where water is scarce.

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

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

Karman said it will begin customer deliveries in the summer of 2026 from its Los Angeles production facility, which is designed to produce 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, leaders in heat rejection systems.