Hello, Reader.
Water, water, every where,
Nor any drop to drink
These lines from Samuel Taylor Coleridge’s “The Rime of the Ancient Mariner” refer to a thirsty sailor on a ship who is surrounded by salt water that he cannot drink.
The data centers that power artificial intelligence, like this poor sailor, are also experiencing an extreme need for water.
As we discussed in Monday’s Smart Money, although AI does not directly consume water, the data centers that power AI technologies do. Most of that H2O finds its way into the cooling systems that prevent data center server racks and components from overheating. The centers also use water indirectly from their electricity use.
I also said that most folks don’t realize how water-intensive GenAI programs like ChatGPT can be. Shaolei Ren, an associate professor of electrical and computer engineering at University of California, Riverside, conducted research to calculate that impact. He and his team observed…
GPT-3 needs to “drink” (i.e., consume) a 500ml bottle of water for roughly 10-50 responses, depending on when and where it is deployed. These numbers may increase for the newly-launched GPT-4 that reportedly has a substantially larger model size.
In today’s Smart Money, let’s examine data center water consumption in the context of global trends… and then I’ll share how you can get in on the opportunities that this brings.
Global Water Trends
For most of us in the United States, water rarely seems particularly scarce or precious. Even in drought-prone California, where I live, swimming pools never go empty.
And why should they? Water covers 71% of our planet’s surface.
Thanks to photographs from the Apollo space missions of the late 1960s and early 1970s, all of us Earthlings gained the opportunity to see what our beautiful “blue marble” looks like – lots of water surrounding little bits of land. You can see one such photo below.
“Earthrise,” as first seen by the Apollo 8 crew in December 1968.
But even though water covers nearly three quarters of the earth’s surface, most of it is either salt water or is frozen in polar ice caps.
Less than one percent of the Earth’s water is available for human consumption. That tiny one percent must quench the thirst of 8.2 billion humans, irrigate crops, rinse food, and enable millions of industrial processes around the globe to function.
That doesn’t leave a whole lot of water for other uses, like satisfying the baseline human consumption that provides what the United Nations calls a “dignified life.”
According to the United Nations, a dignified life consumes about 1,000 gallons a day, when you include both direct use and indirect use like growing oranges. But many of the Earth’s inhabitants do not have access to that level of dignity. In fact, more than 2 billion people – or one quarter of the global population – cannot even access reliably safe drinking water.
Meanwhile, continuously rising demand for water from industrial users is intensifying the competition for safe, potable supplies. During the last 40 years, water use has increased by about 1% a year. And now, the data center industry is showing up and demanding a growing share of this precious molecule.
It must be said… the industry’s timing is not ideal.
According to a landmark new report by the Global Commission on the Economics of Water, the system that moves water around the Earth is off balance. This system cycles water around the planet by evaporating it into the atmosphere from lakes, rivers, and plants, then sending it back down to the ground in the form of rain and snow.
However, as Johan Rockström, co-chair of the commission explained…
For the first time in human history, we are pushing the global water cycle out of balance. Precipitation, the source of all freshwater, can no longer be relied upon.
Because of this new and serious imbalance, the commission is recommending a “fundamental regearing of where water sits in economies.” This is another way of saying that aggregate water prices must rise enough to promote its sustainable use.
Reading between the lines, the data center industry will find its water, one way or the other, but probably at prices that are much higher than today’s.
Some companies, like Amazon.com Inc.’s (AMZN) Amazon Web Services (AWS), are trying to offset their water use by developing various recycling projects. The data center giant is investing in 13 international water restoration projects in a quest to become “water positive: by 2030.
While these efforts are a step in the right direction, none of them provide any water that AWS data centers actually use. They merely “offset” part of that use. In other words, these efforts are somewhat like planting orange trees in Florida to offset oranges you harvest from trees in California.
Opportunity Abounds
Now, data centers aren’t just gulping down water; they’re also sucking up electricity.
In fact, the data centers that power AI technologies require such prodigious – and reliable – volumes of electricity, that combined electricity consumption of tech giants Amazon, Microsoft Corp. (MSFT), and Meta Platforms Inc. (META) soared more than 80%.
That explosive growth is certain to continue.
In 2022, data centers accounted for approximately 1.3% of global electricity demand. But according to Goldman Sachs, data centers will consume more than 4% of the world’s electric power by 2039, and more than 8% of U.S. electric power.
The good news is my InvestorPlace colleague 抖阴最新版 has found a company that is well-positioned to capitalize on data centers’ growing demand for electricity.
The company provides custom-engineered power solutions and automation systems, which data centers need for reliable power management. And its products help monitor and control electrical distribution, improving safety and efficiency.
Demand for this company’s products and solutions are so strong that Louis’ system has flagged it as having the potential to skyrocket 100% or more in the next 12 months or less.
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Regards,
抖阴最新版
