By Isabel Siew
Artificial intelligence (AI), semiconductor manufacturing and data centres are driving a new wave of digital infrastructure investment — but behind the computing power lies a less visible resource challenge: water.
From cooling data centres to producing ultrapure water for semiconductor fabs, the technologies powering the digital economy can be highly water-intensive. At the same time, many of the regions attracting these investments are already facing water stress, creating a paradox at the heart of the technology boom: how can industries expand their water demand without placing greater pressure on communities and ecosystems?
For Kunal Shah, senior vice-president and global head of DevCo at Aquatech, the issue extends beyond the facilities themselves. Water is also required throughout the supply chain supporting digital infrastructure, from mining copper and nickel to producing lithium for batteries and manufacturing solar cells. “People imagine chips run on electricity. They do — but they are also born of water,” Shah said.
Govind Alagappan, chief operating officer at Gradiant, points to semiconductor manufacturing as one of the most significant challenges. A leading-edge fab can consume between 20 million and 38 million litres of water a day, while data centres are being built at a pace that can outstrip municipal supply planning.
The scale of this growth is forcing water to become a strategic consideration alongside power, land and capital.
From thirsty to circular
The solution, according to both Alagappan and Shah, is not simply to eliminate water use, but to rethink how water is sourced, treated and reused. Industrial customers increasingly want certainty around water supply and quality, rather than simply an individual treatment system.
For semiconductor manufacturers, this means designing circularity into facilities from the outset. Wastewater can be segregated according to its characteristics, allowing specific contaminants to be removed and water to be progressively recovered.
According to Alagappan, Gradiant is enabling semiconductor manufacturers to reclaim up to 99% of their used water. He argues that the economics of reuse have changed significantly: wastewater is increasingly being viewed not as a compliance cost, but as a reliable source of new water.
Advanced membranes, point-of-use treatment, resource recovery and zero-liquid-discharge systems can all contribute to this approach.
Singapore’s NEWater programme demonstrates how such strategies can support water-intensive industries. High-grade reclaimed water is used by semiconductor manufacturers, while decades of investment in reuse and desalination have helped provide the certainty required by industry despite the country’s limited natural freshwater resources. “Singapore didn’t become water-secure by accident; it became water-secure by design,” said Shah.
Cooling the AI boom
Data centres present a different dimension of the paradox. Their water demand is largely associated with cooling, and the growth of AI workloads is increasing the pressure on cooling systems.
Yet reducing water consumption can come with an energy penalty. Alagappan states that dry cooling uses less water but can require more electricity, while evaporative cooling generally uses more water but can offer greater cooling efficiency. “Air-cooling is not a water solution; it is a water problem disguised as an engineering choice,” said Shah.
Both Alagappan and Shah point to fit-for-purpose water as a more productive way forward. Treated municipal wastewater, for example, could be used for cooling tower make-up, reducing reliance on potable supplies while providing a use for water that might otherwise be discharged.
Within cooling systems, increasing cycles of concentration and recovering cooling-tower blowdown can further reduce consumption. Digital monitoring and AI-driven optimisation can also help operators manage water chemistry according to changing loads and conditions.
For Shah, however, the technology is only part of the equation. Regulatory approval and financing structures must also enable long-term wastewater reuse projects.
Water could shape where tech is built
As the ‘thirsty tech’ economy expands, water availability is increasingly influencing site selection. “When a fab operator evaluates a location today, they are modelling twenty-year supply projections, climate-stress scenarios, geopolitical stability, and the credibility of the local regulator,” said Shah.
Alagappan has similarly seen projects delayed, re-scoped or relocated when their water requirements could not be adequately addressed.
This does not necessarily mean that water-intensive industries will only develop in water-rich regions. Instead, reliable water infrastructure may become more important than natural freshwater availability. “Growth will follow water infrastructure,” Alagappan said.
For governments seeking to attract semiconductor and data centre investments, this makes long-term planning around reuse, desalination and industrial water infrastructure increasingly important.
Making the paradox work
Technology alone will not resolve the tension between digital growth and water security. Regulation, economics and corporate stewardship will all influence how quickly industries adopt circular water practices. “Regulation sets the floor, economics determines the pace, and stewardship defines the ceiling,” said Shah.
Industrial clusters could provide another opportunity, allowing multiple facilities to share water-reuse or zero-liquid-discharge infrastructure. Resource recovery could also improve the economics of treatment by recovering materials such as copper, metals and chemicals from industrial wastewater.
Business models are evolving too. Water-as-a-Service and build-own-operate models can shift responsibility for long-term system performance to technology providers, giving industrial customers greater certainty while encouraging investment in efficient, reliable systems.
Ultimately, the ‘thirsty tech’ paradox is not necessarily a choice between digital growth and water security. It is a question of whether the infrastructure supporting that growth can become more circular.
For semiconductor fabs, this means designing water reuse into facilities from the beginning. For data centres, it means using fit-for-purpose water and balancing cooling efficiency with water and energy demands. Across both sectors, it means treating water as a strategic resource rather than an unlimited utility. “Water stewardship is not a constraint on industrial growth,” said Shah. “Done right, it is the foundation of it.”
The digital economy may be thirsty, but its water footprint does not have to grow in lockstep with its computing power. The challenge now is to ensure that every new chip, server and data centre is designed with the water it depends on firmly in mind.
