BusinessJun 27, 2026
Why Water Infrastructure Is Emerging as the Next AI Growth Play
Resource Efficiency
Rhea Lobo
Discover
AI's buildout is putting water in the spotlight. As data centers consume more water for cooling, communities, regulators, and the United Nations are demanding greater accountability. Investors are beginning to look at the companies supplying the infrastructure behind it.
The backlash is arriving fast. Roughly 70% of Americans say they'd oppose a data center in their community, with water and energy concerns carrying equal weight, according to Gallup polling from May.
Virginia lawmakers, overseeing the world's highest concentration of data centers, recently moved to restrict the most water-intensive cooling methods.
The UN Secretary-General called on companies to publicly disclose data centers' water, carbon, and land footprints. Alphabet, Amazon, and Microsoft have each launched efforts to explain and justify their water use, a sign they're feeling the reputational heat.
A Bank of America report estimated that electricity generation accounts for ~75% of a data center's total water footprint, meaning the problem extends well beyond the facility itself.
"The important point is: How much water does a data center use in the region where it's taking the water from?" said Peter Gleick of the Pacific Institute.
That local-impact framing is exactly what's pushing data center operators toward vendors who can help them cut consumption fast.
Vertiv Holdings Co is the clearest beneficiary inside the data center supply chain. The company recently introduced PurgeRite NearZero, a fluid management service designed to cut water use during the commissioning of cooling systems.
In select deployments, the process reduced water consumption by as much as 78% and cut water haul-off volumes by up to 91%.
then moved to lock in European manufacturing capacity. The company completed its acquisition of ThermoKey, an Italian heat-rejection and heat-exchange specialist, in June.
ThermoKey's technology includes dry coolers and compatibility with low-global-warming-potential refrigerants, tools that matter as regulators and communities push back on water-heavy cooling.
shares have gained more than 140% over the past year, reflecting how fast this story has repriced.
The pressure isn't limited to cooling technology. Industrial wastewater treatment is getting a fresh look as data center operators face tighter discharge regulations and sustainability mandates.
Xylem recently announced a commercial partnership with Gross-Wen Technologies, a startup that uses algae rather than chemicals or bacteria to remove nitrogen and phosphorus from wastewater.
The two companies had already been deployed independently on a major industrial wastewater project in Pasco, Washington, before formalizing their relationship.
Ecolab Inc is the third name worth watching here. Morningstar analysts rate it a wide-moat, undervalued stock. Ecolab controls ~9.5% of the $165B global cleaning and water management market.
Its water business has growing exposure to AI through semiconductor manufacturing and data center customers, a segment Morningstar expects to drive faster-than-average revenue growth over the next decade. Ecolab also recently announced plans to acquire CoolIT Systems, a data center cooling company, for $4.75B in cash.
The water-AI nexus is spreading across thermal management, wastewater compliance, and water treatment chemistry, three distinct sub-sectors that don't move in lockstep.
offers the most direct exposure to data center cooling demand, but it's already priced for strong growth. trades at a discount to Morningstar's fair value and carries a more defensive revenue profile through its razor-and-blade model, where ~80% of revenue comes from repeat consumables. provides exposure to the industrial wastewater compliance angle, which is being driven by tightening nutrient regulations independent of AI spending cycles.
Transparency requirements are the next near-term catalyst to watch. Microsoft and Google are both set to release annual environmental reports in the coming weeks, which could surface new data on water consumption and accelerate vendor negotiations across the supply chain.
