New Delhi

Artificial Intelligence (AI) data centers are expected to significantly increase global water consumption in the coming years, according to a report by Morgan Stanley.

The report said annual water use for cooling and electricity generation by AI data centres could reach around 1,068 billion litres by 2028.

"AI data centers to drive annual water consumption for cooling and electricity generation to approximately 1,068 billion liters by 2028 (our base case) - an 11x increase from 2024 estimates," it stated.

The report noted that while water use for cooling data centres is widely acknowledged, the indirect water use through electricity generation remains underappreciated. AI's broader water footprint also includes semiconductor manufacturing.

Facilities involved in semiconductor production can consume as much as five million gallons of ultrapure water every day, highlighting the industry's dependence on water-intensive processes.

The report also said water consumption estimates depend on several factors, including assumptions around water intensity, consumption factors, cooling technologies, and regional energy mix.

As operations adopt more efficient solutions, these figures could change. To reflect this uncertainty, the report presented three possible scenarios. Under these, AI's water use could vary between 637 billion litres and 1,485 billion litres annually by 2028.

The water footprint of AI extends across three scopes. Scope 1 relates to on-site data centre cooling, scope 2 to electricity generation, and scope 3 to semiconductor manufacturing.

Electricity generation (scope 2) typically accounts for the largest share of water use, followed by cooling (scope 1) and semiconductor production (scope 3).

Although AI's overall global water consumption may appear modest, the report highlighted that the impact is highly localised.

More than half of the leading global data centre hubs are situated in regions that already face medium risks linked to water scarcity, drought, flooding, and declining water quality.

Similarly, many secondary markets and emerging data centre hubs are located in areas with high or very high water stress.

The report stressed that water consumption is a rapidly evolving issue for the AI sector.

It stated "More than half of the world's top data center hubs are in areas already facing medium basin physical risk (i.e., medium level vulnerability) to threats from drought, flooding, and declining water quality".

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With the increasing demand for cooling and electricity generation, managing water resources efficiently will remain critical for the industry's growth and sustainability.