The Silent Growth Constraint

If we’re ever going to get ahead of the proliferation of AI needing a home in a Hyperscale Data Center, we need more capacity, power, and space. We also need to address the quiet concern that’s finding its very loud voice: water

Specifically, the large-scale use of water causing some municipal officials to defend its use in data centers at the expense of the Muni’s water supply. This is not just the rantings of the NIMBY crowd.

In 2023, U.S. data centers consumed approximately 66 billion liters (around 17.4 billion gallons) of water, with more than 80 percent of that used for cooling【1】. And as AI infrastructure surges, that number is only climbing. For companies planning 50, 100, or even 200 MW campuses, that water footprint isn’t just unsustainable—it’s becoming a strategic liability.

Why Water Is Suddenly a Strategic Risk

1. Regulatory Scrutiny Is Escalating
   State and local regulators in key hyperscale hubs, like Northern Virginia, are now demanding detailed water-use projections before approving permits【6】. It’s no longer enough to submit a power plan—operators must also justify their water plan. Without credible answers, projects risk long delays or outright rejection.

2. Community Trust Is Fraying
   Communities in drought-prone regions are pushing back hard against projects that compete with residential and agricultural needs. In Brazil’s Caucaia, one large-scale data center was reported to consume up to 80% of all withdrawn water in the region—sparking protests and national headlines【2】. That sort of narrative sticks, and hyperscalers everywhere are being painted with the same brush.

3. Investors and Partners Are Watching
   The financial community is shifting its lens. It’s no longer enough to show energy efficiency—water footprint is becoming a key metric of responsible growth. Microsoft, for example, has improved its water usage effectiveness (WUE) from 0.49 L/kWh in 2021 to 0.30 L/kWh by 2024【2】, a benchmark others are now expected to meet or exceed. Investors see water not as a side note, but as a proxy for long-term viability.

4. Global Water Stress Is Intensifying
   Half of the world’s population already lives in water-stressed regions. In the U.S., 40% of data centers operate in high or extreme water-scarcity zones【5】. By 2027, global AI infrastructure alone could demand 4.2–6.6 billion cubic meters of water annually—more than half the UK’s entire yearly consumption【3】【4】. If operators fail to adapt, water will become the hard stop on digital growth.

Cooling Without Consuming

The good news: water doesn’t have to be a limiting factor. Closed-loop cooling systems are rewriting the equation by recirculating coolant indefinitely, without evaporation or ongoing draw from municipal supplies. Once filled, they run leak-proof and water-neutral.

What Operators Gain by Going Water-Neutral

• Zero freshwater draw → Expansion doesn’t compete with communities or agriculture

• Faster permitting → Approvals accelerate when water isn’t in question

• Credibility with partners → Measurable, reportable progress on resource use

• Future resilience → Built-in protection against droughts and tightening rules

• Scalability → Capacity to grow past 100 MW without water bottlenecks

From Liability to Differentiator

Water stewardship is no longer optional—it’s strategic. For hyperscalers, the operators who shift fastest will not only meet demand but win trust, approvals, and reputational strength.

The playbook is clear:

• Adopt cooling systems that eliminate ongoing water consumption.

• Be transparent in reporting.

• Position water leadership as part of your growth story.

How Valadez & Associates Helps

At Valadez & Associates, our role is clear: we help hyperscale operators align growth with water sustainability. We partner closely with leading engineering firms that design and integrate the right systems, while we focus on strategy, positioning, and stakeholder alignment.

Here’s how we support our clients:

• Growth alignment: Mapping water-related risks and opportunities across expansion plans.

• Solution pathways: Working with engineering partners to deploy closed-loop, water-neutral systems tailored to hyperscale needs.

• Narrative building: Crafting strategies that not only address government requirements but also build genuine goodwill with communities and confidence among capital partners.

Growth isn’t slowing down. Neither is water stress. The question isn’t whether you’ll expand—it’s whether you’ll expand responsibly, sustainably, and at speed.

Ready to Scale Without Sacrificing Water?

Valadez & Associates works at the intersection of hyperscale growth and water sustainability. If you’re planning 100 MW or more, we’ll help you design and deliver strategies that unlock scale without adding to the world’s water crisis.

Let’s talk.

References

1. Lawrence Berkeley National Laboratory, 2024 United States Data Center Energy Usage Report, summarized in Data Center Dynamics, Dec 19, 2024.
   👉 https://www.datacenterdynamics.com/en/news/doe-data-centers-consumed-44-of-us-power-in-2023-could-hit-12-by-2028

2. How Are Data Centres Shifting to Zero-Water Cooling Tech? – Data Centre Magazine, July 21, 2025.
   👉 https://datacentremagazine.com/news/how-are-companies-pioneering-data-centre-zero-water-cooling

3. University of Illinois, Civil & Environmental Engineering, AI’s Challenging Waters, Oct 2024.
   👉 https://cee.illinois.edu/news/AIs-Challenging-Waters

4. Financial Times, AI Boom Sparks Concern About Water Shortages, Nov 2024.
   👉 https://www.ft.com/content/6544119e-a511-4cfa-9243-13b8cf855c13

5. Business Insider, AI Data Centers and the Water Crisis, June 2025.
   👉 https://www.businessinsider.com/ai-data-center-cost-2025-6

6. Joint Legislative Audit & Review Commission (JLARC), Data Centers in Virginia Report, 2024.
   👉 https://jlarc.virginia.gov/landing-2024-data-centers-in-virginia.asp