In the tech world, Erez Freibach and Nahshon Eadelson are polar opposites. For most of his career, Freibach worked as a senior executive for Israeli companies, living between Silicon Valley and Israel. He was a finance manager at Indigo before it was sold to HP for $830 million, and held senior positions in large communications companies such as multinational 3Com and Israeli company Atrica. Eadelson, for his part, doesn’t have a college degree – he barely completed high school – but his track record spans companies and innovations in everything from algae cultivation to cooling systems for electric vehicle batteries. The two first met at the Merage Foundation Israel entrepreneurial incubator in the Negev, founded by David and Laura Merage, where Freibach served as a mentor, which included mentoring Eadelson.
“After that chapter ended, we each went our separate ways until Nahshon came to me with a list of 20 ideas,” Freibach recalls. “We then started working on a cooling device for soldiers, sort of a uniform with a battery sewn into a pouch, but after a few months I told him I knew nothing about fashion. We then turned to cooling systems for gaming computers. From that point on, I also wanted us to solve the problem of overheating servers.”
So, nine years ago, the two founded their startup ZutaCore. Both have strong ties to the Gaza border region – Freibach was raised on Kibbutz Nahal Oz and Eadelson lives on Sdei Avraham and made the decision to locate their company in Sderot. They then convinced Intel, Nvidia, and SoftBank that the system they had developed could make a big difference when constructing AI factories, the large-scale data centers that serve giants like OpenAI, Google, and Microsoft. The waterless liquid cooling solution they designed is helping the tech giants overcome one of the industry’s most painful and least known problems: overheating GPUs and CPUs – the very chips driving the AI revolution.
When they founded ZutaCore nine years ago, the two chose to bet on Intel, then still a growing company that dominated the pre-AI era global chip market. “We tried to convince physicists at Intel and other companies that our solution worked,” Freibach says, “but everyone told us it contradicted the laws of physics, and until they saw the system with their own eyes, they didn’t believe it.”
However, a photo from inside their lab convinced Intel’s cooling division head to fly to Israel and see the invention for himself. “We were sitting in one of the rundown office rooms at the Sderot Bus Company. We put the Intel executive in front of the system, showed him how it withstood different amounts of pressure and fluctuating temperatures. He was shocked. He took out his camera and as he filmed it, his voice was shaking. It seemed like he was experiencing a scientific epiphany. We realized that we had a solution no one had thought of, before us.”
Now, in this “Globes” exclusive interview, ZutaCore is announcing a new partnership: its cooling system has been selected by SoftBank as the main supplier of cooling systems for its AI servers. SoftBank, along with OpenAI, Tesla, and Oracle, is expected to lead the Stargate project that President Trump initiated on entering the White House, with the intention of transferring the bulk of AI processing power to the US from the Gulf states. Using ZutaCore’s cooling system, SoftBank’s servers will be able to accommodate a greater number of processors and perform a much larger volume of calculations, to satisfy America’s hunger for AI.
SoftBank has experienced some notoriety regarding several scandals, such as its huge $300 million investment in Adam Neumann’s WeWork, which went down the drain, along with losses suffered throughout 2022-2023. However, since these crises, the Japanese giant has been trying to improve its image through large deals in one of the fastest-growing sectors: AI processing. For example, it invested $40 billion in OpenAI at a $300 billion valuation, and floated ARM, the chip company it owns, whose technology is also embedded in Nvidia GPUs. “SoftBank announced an investment of hundreds of billions of dollars in the server sector and chose us as their cooling solution,” says Freibach.
An unexpected revolution
The launch of ChatGPT brought with it an unforeseen revolution in the way millions access data and create content. But unlike a simple Google search, AI processing requires extraordinary computing power that makes its operation significantly more expensive. This is one of the reasons why services like ChatGPT, Sora, and Claude require significant monthly payments, and yet, continue to bleed cash non-stop.
The bottleneck to growth is not just the production quota for Nvidia GPUs – each estimated to cost between $30,000 and $50,000 – but also the need for new data centers, equipped with server racks in which the chips are embedded. To date, one factor that has made setting up these data centers costly – though downplayed by cloud and chip giants – is the need for more powerful cooling systems.
AI chips can reach temperatures of 50-60 degrees centigrade, and can rise even higher, up to 100 degrees centigrade when installed together in the same server rack. Until now, the main cooling method has been to install giant fans, making these facilities extremely cold and noisy; an unpleasant working environment that also consume major amounts of electricity. At these facilities, which currently constitute most data centers cooling costs account for up to 40% of electricity consumption. According to a Goldman Sachs study, data centers consume 3% of US electricity consumption. By 2030, this figure is expected to grow to 8% of total consumption, a figure that is slightly higher than the electricity consumption of the entire state of California.
In recent years, Nvidia and its server manufacturers – companies like Dell, Supermicro, and Foxconn – realized that air-cooling was not an efficient enough ventilation system. They found a familiar industry solution: water or liquid cooling, which is now the main cooling method for Nvidia’s new generation of Blackwell processors. The market has increasingly accepted the benefits of liquid cooling. For example, Supermicro, one of Nvidia’s server manufacturers, stated it will use liquid cooling in 20% of its server cabinets by 2025, adding that these will be able to reduce power consumption by 30% to 40%. Nvidia stated that liquid cooling will enable it to double the computer power of what was previously possible with air-cooling.
But water cooling also has its drawbacks: it corrodes pipes, requires high maintenance, and most importantly, it can leak and cause short circuits. In fact, just one drop of water can cause serious damage to a large server rack costing millions of dollars. Foxconn’s stock crashed last July after its servers, based on Blackwell chips, were damaged by a water leak. In addition, water cooling systems are very expensive, about 15 to 20 times the cost of the air-based cooling system used for Nvidia’s older H100 chips. States like California, Nevada, and Texas also suffer severe water shortages that raise the price of water cooling, so the market is once again searching for a more environmentally friendly alternative. Nonetheless, Morgan Stanley expects the liquid cooling system market to double to $4.8 billion by 2027.
“Other companies have collapsed”
This is what brought SoftBank CEO Masayoshi Son to Sderot. ZutaCore belongs to a new wave of companies that use a synthetic fluid that does not conduct electricity, so that even if it leaks, it will not short circuit the server’s operation. But ZutaCore’s technology makes it a unique player, even among its competitors: its liquid boils at a relatively low temperature of 34 degrees centigrade; the boiling action absorbs the chip’s heat. According to ZutaCore, this allows the lowest chip cooling cost available today: $0.03 cents per kilowatt.
“AI factory managers today are having a hard time cooling Nvidia, Intel or AMD chips,” Freibach says. “The existing solutions will be insufficient in two years. If you ask Nvidia CEO Jensen Huang who makes phones, he’ll name Apple. If you ask him about phase-change cooling, he’ll name ZutaCore.”
In this case, “phase-change,” or “two phase” in industry parlance, is the change in state when a fluid becomes a gas. The company’s technology is based on a mechanism of pressure regulation and boiling micro-bubbles. For example, take a pasta pot and boil water in it. For this to happen, the bottom of the pot needs to heat up to at least 108 degrees centigrade. The analogy to ZutaCore’s technological achievement, Freibach notes, is that the company ostensibly achieved boiling water in the pasta pot at 101 degrees centigrade. ZutaCore claims it is supported by 24 related patents.
Waterlessness, and the fact that this cooling process dissipates heat from the chip environment, are attracting some of the world’s largest refrigeration companies to ZutaCore. Recently, US company Carrier led a $30 million investment round, with the participation of Israeli shipping company ZIM. Previously, ZutaCore raised $40 million from investors such as LIP Ventures Boutique and Mitsubishi Heavy Industries, as well as private investors like Marius Nacht, Itay Rosenfeld, Avinoam Nowogrodski and Yair Alster, according to the IVC Research Center.
Despite the company’s relatively early success, only recently has it been able to enjoy the fruits of its efforts. “The penny just dropped and suddenly companies are admitting there’s a different kind of physics,” says Freibach. “For many years, we lived on revenue from HPC (high-performance computing, the extremely powerful computers used mainly by academic institutions or the military). Some liquid cooling companies did not survive the seven lean years and collapsed. Eighteen months ago, the industry realized this story was over and that every new chip would need liquid cooling.”
“We got no help”
ZutaCore’s more than 100 employees come from Gaza border communities, Sderot, Beersheva and surrounding areas. The company did not escape the events of October 7th unscathed. “That Saturday, no one was in the office, but through the security cameras you could see the terrorists firing RPGs at our building, which was damaged,” he says.
Freibach, who was in Mountain View, California that day, immediately returned to Israel to take care of his employees. A third of the company was drafted into the reserves. “On October 7, I celebrated my 60th birthday. I also found myself reviewing our entire employee roster with our human resources manager, asking staff what they needed. Within a week, we organized a company-wide Zoom every morning and within three weeks we were back at work, and that anchored us. It was precisely during those days of the war that we experienced our big breakthrough.” To bring work-from-home staff back to the building, he built a saferoom using a designated budget.”
Did you receive government assistance?
“We gave our employees an aid package, and received support from some of our investors, too, but the truth is that we didn’t get any help. We were given encouragement… reassurance. We didn’t ask for donations, and therefore we didn’t receive any.”
And what about the Ministries of Finance and Economy, the Tkuma Directorate (the government authority responsible for rehabilitation of the Gaza border communities)?
“Why should they give to me? My story is about success, not survival. We haven’t received any benefits to this day, aside from a tax benefit as a business operating in Sderot.”
SoftBank is from Japan, a country that has been cool towards Israel since the war. How do they view this [situation] there?
“We don’t deal with that. Ultimately, the market wants our solution, and it’s not interested in the war. I’ve been to Japan once – they applauded us, and that was heartwarming. To date, there has never been a case where we’ve suffered because of the war.”
Published by Globes, Israel business news – en.globes.co.il – on April 18, 2025.
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