| Katusa's Investment Insights | | The Shocking Truth About AI's Thirst for Water By Marin Katusa | | “Don’t be evil” used to be their slogan.
But times have changed. And now it takes a lengthy lawsuit to find out what’s really going on at Google.
The Dalles, a small city in the center of northern Oregon, found that out the hard way.
“The Dalles” comes from a French term referencing the flow of water through a narrow channel—and the usage of that water is exactly what Google wants to keep secret. They even paid more than $100,000 in attorney’s fees to keep it under wraps, designating it a “trade secret.”
But finally, in a settlement with the local newspaper, Google relented.
It turns out that Google’s data centers in the Dalles use copious amounts of water, and their water usage has tripled in the past five years. | | Google now uses nearly one-third of the city’s water, or enough to flood the entire city three inches deep, every year. That’s going to continue to rise, as Google is building two more data centers in the Dalles.
The experience in Oregon is typical across the U.S.: Google generally forces cities to sign NDAs regarding their water usage. | | | Sponsored
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Privacy Policy/Disclosures | | | Keep Cool and A.I. On
Most investors know that data centers must be kept cool to preserve the equipment and increase efficiency. But they might not know that there’s a basic tradeoff for cooling data centers: Operators have to use either electricity or water.
In the past two years, there has been heavy public scrutiny around the lack of power available for data centers. But water usage hasn’t had that same level of scrutiny.
So Google is substituting high-emissions electricity with low-cost water. Take it directly from Google’s 2024 environmental report:
While it will take more time for electricity grids to decarbonize, we’ll continue using water cooling to improve our energy efficiency.
[We] recognize that this tradeoff will increase our data center water footprint. . .
It’s not just Google.
All of the big tech companies are using water to artificially decrease their carbon emissions.
How much water, exactly?
In 2023, Google data centers used 20.8 billion liters of water—up 28% from 2021. That’s the amount of water required to produce 11.4 million Teslas (including the batteries), or twice as many as Tesla has produced since it began production.
It’s not hard to see why water usage is skyrocketing. The tech giants are now creating what Nvidia CEO Jensen Huang calls “AI factories.” These new data centers require extremely powerful chips in extremely dense arrays—which require an extreme amount of water for cooling.
AI factories have kept tech companies from reducing water used for cooling, no matter how hard they try.
In 2021, Microsoft announced they would be cutting data center water usage by 95% by 2024. But here’s what Microsoft’s water usage actually looks like for the last four years: | | So now they have a new target: 40% water intensity reduction… by 2030. Microsoft’s performance in water usage is so bad that its Manager of Data Center Sustainability resigned in protest.
The extent of tech companies' high water usage isn't widely known.
"The reason there's not a lot of transparency… is [because] most companies don't have a good story here."
– CyrusOne Vice President Kyle Myers
The story is not going to get better, because AI factories are just the beginning. OpenAI wants to build several 5GW data centers—each one as big as Microsoft’s entire data center capacity currently.
That means a single data center would use 13 billion liters of water a year.
UC Riverside researchers have estimated that by 2027, global AI data centers could use 6.4 trillion liters of fresh water.
In a cruel, ironic twist, data centers are being built out where power is cheap and carbon-free—places with abundant wind and solar, like California, Arizona, and Texas. Those are places where water is already scarce.
In those states, data centers are competing with agriculture and residential water use.
The Water Competition
The reliance on water and competition against humans—poses a high risk for data center developers and tech companies. In the future…
"Water is going to be king." – CyrusOne VP Kyle Myers
Everyone knows that AI data centers are power-hungry. Few people know they’re water-desperate—and getting worse. In 2023, 42% of Microsoft’s water consumption came from areas already experiencing water stress.
Which is why Microsoft and others have started looking for alternate sources of water.
Water rights holders in key regions like Texas and California—where the data centers are being developed—have an incredible opportunity right beneath them.
And because there is very little transparency or comprehensive data on the water footprint of the largest data centers, very few investors are aware of this opportunity yet.
But it’s NOT just about water competition but Heated Water Effects on the environment.
There are environmental impacts of the “heated” water because its released back into the environment after the water is used to cool the data center.
Few are talking about this and there will be more data and research about these impacts.
But I have my eye on a few companies full of liquid gold.
Regards,
Marin Katusa
P.S. Click here to learn more about my premium research service – Katusa’s Resource Opportunities. You’ll get a front-row seat to my analysis, AND where I’m putting my own money in the markets. | | | For Real-Time Market Alerts, Follow Us: | | | |
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