The rapid expansion of artificial intelligence is fueling an unprecedented global data center construction boom, but a new report has found that an overwhelming majority of them may be located in areas vulnerable to climate threats.
According to a new analysis by climate risk modeling firm First Street cited by CNBC, nearly 80% of the world's data center capacity is located in areas exposed to elevated climate hazards, including flooding, wildfires, extreme heat, powerful winds, and water stress.
Governments and technology companies continue pouring billions of dollars into data center development to meet soaring demand for AI. "Where you build a data center determines a large share of what it will cost to run for the next 20 or 30 years," First Street Chief Economist Jeremy Porter said in a statement accompanying the report.
Climate-related factors such as cooling requirements, water availability, and infrastructure reliability are becoming major operational considerations, he added. These facilities house thousands of servers that store, process, and distribute data for websites, streaming services, cloud computing platforms, and AI systems.
Because the equipment generates enormous amounts of heat, operators rely on energy-intensive cooling systems and, in many cases, substantial water resources to keep servers functioning safely. The study found that 54% of global data center capacity is already located in markets exposed to chronic climate pressures, including flooding and severe wind events. Such hazards can disrupt operations, damage equipment, and drive up insurance costs.
The United States is seeing a massive surge in data center construction. Roughly 3,000 facilities are already operating nationwide, while another 1,500 are under development, according to industry data cited in the report. Much of that growth is tied directly to AI investments from major technology companies.
A recent insurance industry analysis by MS Amlin found that 56% of planned or under-construction U.S. data centers are being built in states considered high-risk for natural disasters, exposing nearly $800 billion in investments to threats such as tornadoes, hurricanes, winter storms and severe thunderstorms.
Extreme heat represents another growing challenge. Data centers operate most efficiently within a relatively narrow temperature range. Rising temperatures increase cooling demands, raise electricity consumption, and can strain already stressed power grids. Studies suggest that many of the world's existing data centers are already located in climates that require continuous cooling penalties, increasing both operating costs and environmental impacts.
Water availability is also becoming a concern. Data centers can consume millions of gallons of water each day for cooling. According to research by Most Policy Initiative, annual water use by U.S. data centers could at least double by 2028, with many new facilities being built in regions already experiencing significant water stress.
The Environmental and Energy Study Institute estimates that data centers accounted for 4.4% of total U.S. electricity consumption in 2023 and could consume as much as 12% by 2030 as AI deployment accelerates.
