AI’s rapid growth is driving demand not only for electricity but also for the clean water needed to run its physical infrastructure. As data centers expand, rising water intensity is straining supplies and testing long-term sustainability. In our analysis, these pressures create both risks and opportunities for active investors.
How Cool Is AI?
AI’s explosive growth shows little sign of ebbing, with a record $350 billion projected for AI-focused business investment in 2025 alone. As a result, global capacity for AI’s server-housing facilities, or data centers, is expected to rise 23% in each of the next five years, with the US dominating.
The build-out is expected to spike data-center electricity demand by 160% in the US, contributing to a 25% increase in overall power demand through 2030, according to the International Energy Agency. Meeting greater global power needs will have distinct challenges. But we also see a variety of potential risks stemming from water becoming either more scarce or less pure.
This is because AI’s powerful data centers tend to run extra hot, and many of them require a lot of ultrapure water to constantly chill them. Consequently, a data center’s success will likely depend as much on access to ample and clean water as on reliable power sources.
Rising Water Risk as a Market Disrupter
Data centers aren’t the only AI boom participants in search of water. Semiconductor manufacturers and utilities are also intensive water users and are likely to need even more of it (Display). US power generation—particularly coal and nuclear—accounts for about 70% of all freshwater withdrawals, though most is returned to its source after cooling.
