By Dalal Street Investment Journal (DSIJ)
Do you know that a medium-sized data centre consumes up to 110 million gallons of water annually, equivalent to 1,000 households? Larger centres can use up to 5 million gallons daily, totaling 1.8 billion gallons annually; equivalent to a town's water usage. Read more about data centres and their water consumption.
Data centres are large facilities that process and store digital information. Inside them are numbers of powerful computers and systems called servers that run websites, store data, perform calculations and respond to prompts. Whenever people send emails, stream videos, search on the internet, or use artificial intelligence tools, their requests are processed by servers in data centres.
These servers work continuously and handle billions of requests daily. To keep them functioning properly, data centres also include systems for power supply, cooling and networking. Because of these complex tasks the servers generate a lot of heat, for cooling purposes air and water are used to maintain safe temperatures and prevent machines from overheating.
Data centres mainly need water to cool the servers that perform digital tasks. Thousands of systems run inside these facilities, and when they perform heavy and multiple tasks at a single time, such as AI prompts, streaming, internet searches, they produce a large amount of heat. If the systems and computers are not cooled down they may stop working or slow down. This is where the role of water comes in.
Water is used in cooling systems to absorb the heat produced during the functions performed by them and ensures that the machine operates safely. The majority of data centres use liquid cooling or evaporative cooling systems. In these systems, water circulates through cooling towers which are large structures that release heat from warm water by allowing it to evaporate into the air, thereby cooling the water so it can be reused in the system, or pipelines which are the network of pipes that carry this cooled water from the data centre’s cooling equipment and server rooms, helping transfer heat away from the servers.
Water is consumed heavily because it is more effective than air at carrying heat away, so it helps maintain the right temperature which is between 18°C and 27°C, and also reduces the amount of electricity needed for the cooling process.
The demand for cloud services and artificial intelligence is growing day by day, so the number of data centres is increasing.This means more cooling is required which automatically signals the need of more water use. Because of this, companies are focusing on more efficient cooling technologies to reduce water consumption and make data centres more environment friendly and sustainable.
Data centres have a thirst for water, and their rapid expansion threatens freshwater supplies. Only 3% of Earth’s water is freshwater, and only 0.5% of all water is accessible and safe for human consumption. Freshwater is critical for survival. On average, a human being can live without water for only three days. Increasing drought and water shortages are reducing water availability. Meanwhile, data centre developers are increasingly tapping into surface and underground aquifers to cool their facilities.
A medium-sized data centre can consume up to roughly 110 million gallons of water per year for cooling purposes, equivalent to the annual water usage of approximately 1,000 households. Larger data centres can each consume up to 5 million gallons per day, or about 1.8 billion annually, usage equivalent to a town of 10,000 to 50,000 people.
A large part of the AI economy’s water use also comes from semiconductor manufacturing. Producing computer chips requires clean ultrapure water, which is water that has been purified to remove almost all minerals, chemicals, bacteria, and microscopic particles so that even tiny contaminants do not damage delicate semiconductor circuits. Up to 4 litres of freshwater is needed to create 1 litre of ultrapure water, meaning this process can consume much more water than what is used in these facilities.
This is the reason why many data centres are located near large freshwater sources to support their cooling process needs. Some facilities in the United States are located near the Great Lakes, which hold about one fifth of the world’s surface freshwater. This region provides naturally cold water that helps the servers to get cool more efficiently, but it also leads to a long term impact on water supplies to the localities
We should start asking questions to ourselves, when was the last time we drafted an email on our own? When did we write an assignment without the help of AI or thought on our own for making decisions? Admit it or not, AI has become an important part of our lives. From choosing a workout plan to planning a daily schedule every small prompt is affecting the environment around us unknowingly.
As the demand for artificial intelligence and digital services grows, researchers and companies are finding ways to reduce water usage for cooling of data centres. Companies like Open AI, Google and Amazon have huge data bases and using water won’t be a sustainable solution because that creates a major problem of water scarcity. One important solution is recycling and reusing the water instead of using fresh water only once.
Companies are also exploring smarter and efficient cooling technologies. Methods such as direct to chip cooling, instead of cooling the entire server room only the main computer chips are cooled down. Also using recycled or non-potable water can reduce both scarcity of fresh drinking water and energy consumption. At the same time, researchers are developing smaller and more efficient AI models that require less computing power. By combining better technology, water recycling, and smarter AI design, the future AI economy can grow while using water more responsibly.
Estimates for global water usage by Artificial Intelligence (AI) vary widely due to limited, inconsistent, and often non-transparent reporting from major technology firms, which rarely separate AI-specific workloads from general data centre operations
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Founded in 1986, Dalal Street Investment Journal (DSIJ) brings decades of experience in India’s equity markets. DSIJ's research combines fundamental analysis with price action, guided by disciplined risk management and capital preservation. They follow a structured, data-driven approach designed to help investors and traders make informed decisions beyond short-term market noise.
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