Against the backdrop of the booming development of artificial intelligence, the enormous electricity demand brought by the AI industry has become one of the hot topics on Wall Street.
Now, JPMorgan Chase has released a report stating that the crisis brought by the wave of artificial intelligence may not only be "power shortages", but also "water shortages".
AI will bring huge water supply pressure
On Monday Eastern Time, JPMorgan reported that the United States is facing severe water supply pressure, which could damage the country's economic outlook and erode corporate valuations.
JPMorgan Chase and sustainable development consulting firm ERM have released a report titled 'The Future of Water Resilience in the US'. The report states that the booming development of artificial intelligence has further exacerbated the water scarcity in the United States.
This is because the artificial intelligence industry requires a large amount of water to cool data centers and semiconductor manufacturing equipment: a large data center can use up to 5 million gallons of water per day, which is roughly equivalent to the daily water consumption of a town of up to 50000 people. In addition, manufacturing semiconductor chips requires billions of gallons of water.
Xiaomo's research indicates that the development of artificial intelligence conflicts with the reality of climate change, resulting in a surge in water demand that clashes with unreliable precipitation patterns, potentially leading to water scarcity.
Rama Variankaval, Global Head of Enterprise Consulting at JPMorgan Chase and lead author of the report, wrote, "Artificial intelligence and data centers are increasing in scale, but this issue is also drawing attention
The author of the report wrote that improper handling of water resources could "cause real disruption to the global supply chain, especially considering the impact of the rapid development of artificial intelligence. Water is essential for both semiconductor manufacturing and data center cooling operations, which are two key business activities related to artificial intelligence.
The study also found that an increasing number of people are migrating to water scarce areas like Arizona, and the trend of manufacturing returning is exacerbating the water crisis in the United States.
Water scarcity may even threaten corporate valuation
Morgan Stanley and ERM believe that water resources' impact on strategic decision-making may reach a level that affects corporate valuation '. This development is forcing more and more investors to pay attention to the impact of water scarcity on their investment portfolios.
The report points out that an increasing number of asset management companies and pension funds recognize that water resource pressure is a financial risk. The World Bank estimates that sustained pressure on water supply may lead to a decline of up to 6% in gross domestic product (GDP) in some regions of the world.
Meanwhile, JPMorgan and ERM point out that this also means that water resources are a huge investment opportunity. They estimate that the water resources industry faces an annual public expenditure gap of $91 billion, with potential investment areas including flood control infrastructure, water treatment facilities, and new technologies. However, currently, private investment in water resources only accounts for a small portion of the required funds.
JPMorgan and ERM have stated that in this context, the market needs to price water, just as many people are now trying to price carbon dioxide.