As AI adoption grows, so do data centers—and so does demand for the cooling technologies that keep them from overheating. This has led to Daikin Applied investing $163 million to build a test lab at its headquarters in Plymouth.

Daikin, a global designer and manufacturer of commercial and industrial HVAC systems, announced the investment earlier this month. The company will use the 71,000-square-foot expansion, expected to open in 2027, to design cooling technologies and simulate operating extremes, testing system limits via “intense computational loads.” The goal is to accelerate company development of “next-generation cooling” for large data centers and others in the HVAC market.

“Data centers have become the beating heart of the global economy,” Yu Nishiwaki, chief operating officer for Daikin Applied Americas, said in an October press release. Each data center poses unique technical challenges, he added, which “make cooling a critical and strategic priority.”

Daikin Applied cites analyst estimates that the market for “data center HVAC hardware” will have grown nearly 150% between 2023 and 2030, from $6.7 billion to $16.6 billion.

The company has described how it will lead in the cooling-solutions space: through product innovation (such as in fan decks and chillers), acquisitions, and a recently launched global business unit dedicated to data centers.

Along with the $163 million, further investments are expected into the Plymouth research-and-development lab prior to its 2027 opening.

The lab will feature nine “test cells.” Four will test air-based cooling technologies; the other five will focus on water-cooled and air-cooled chillers, heat pumps, and “integrated systems.”

With a location at the company’s Plymouth headquarters, the lab is expected to draw from as well as foster area expertise. “The new facility complements our existing ecosystem by providing strategic access to the Minneapolis-St. Paul talent base and supporting ongoing training for engineers, technicians, and cross-functional teams developing next-generation cooling technologies,” the company told Twin Cities Business.

Last month, Daikin also announced its acquisition of Chilldyne, a California-based producer of negative-pressure liquid cooling systems—a method intended to lower costs and the risk of leaks. Chilldyne helps fill out “a comprehensive suite of data center cooling solutions” for Daikin, per Nishiwaki.

In August, Daikin also acquired DDC Solutions, a California-based developer of air-and-liquid hybrid cooling tech. And in 2023, the company bought Alliance Air Products, a California-based HVAC manufacturer.

The company earlier this year announced it would open a manufacturing facility in Phoenix, Arizona, next month, as well, to “significantly enhance production capacity, particularly for large-tonnage plants, to meet the soaring demand” from data centers.

Daikin Applied employs nearly 3,000 in Minnesota, with more than 1,600 across southern Minnesota facilities. The company doesn’t yet have hiring numbers for the new lab.

Its parent company, Daikin Industries, employs more than 25,000 nationally and operates 59 research-and-development labs globally, nine in the United States.