Investors are ignoring the biggest source of data-center water use

AI data centers are getting attention for how much electricity they use, but a bigger water question is getting less scrutiny: generating that electricity takes water, too. Power plants that burn coal or gas, or run on nuclear fuel, heat water into steam and then use more water to cool it. Research cited in the story puts this indirect water use at up to 75 percent of a data center's total water footprint. Meta, one of the few companies to report a figure, said its indirect water use in 2024 was more than 20 times what its data centers used directly on-site for cooling.

This indirect use mostly goes unmeasured and unpriced. Lenders financing new data centers, who now handle most of the borrowing for these projects, do check water use at the facility itself, requiring efficient cooling systems and verifying water rights before construction. But they typically don't look at water risk at the power plants supplying electricity to the site, since that falls outside a normal electricity contract and there's no industry standard for tracking it. That gap matters because these financing deals lock in terms for 10 to 15 years, while river levels, droughts, and groundwater can change much faster.

This isn't something most homeowners can act on directly, but it's a reminder that the AI boom's resource demands extend beyond electricity bills and into local water supplies, particularly in drought-prone regions. Texas, where data centers account for nearly 90 percent of new grid power requests, recently froze approvals until developers verify their water reporting. Few other states have followed.