The AI-energy nexus will determine AI’s impact. We must account for it better

Artificial intelligence (AI) is advancing at unprecedented speed, driving breakthroughs in productivity, automation and decision-making across industries, while also reshaping economies and societies.

Global AI spending is projected to reach $1.5 trillion in 2025 and exceed $2 trillion by 2026, fueling demand for high-performance chips, data centres and widespread applications.

At the core of this growth lies the AI-energy nexus – the intricate interconnection between AI’s consumption of electricity, water and critical materials, and the ecosystems and communities that rely on them.

Pressures in one domain cascade into others: the massive expansion of AI factories and data centres drives surging electricity demand, straining energy supply and infrastructure while accelerating emissions. Water diverted for cooling reduces availability for agriculture and households. Mineral extraction displaces communities and degrades biodiversity. These challenges compound when accounting for direct consumption, indirect or secondary impacts and interconnected resource use across the AI-energy nexus.

By 2030, data centres are projected to consume 945 TWh, surpassing the combined current usage of Germany and France, and over double 415TWh in 2024. Through 2030, AI alone may account for over 20% of total electricity demand growth, with fossil fuels still supplying ~40% of new demand. To mitigate risks to continuity, energy security, costs and carbon exposure, renewable integration is essential.

Energy is inseparable from water, in which it is vital for power generation, and from materials, where refining intensifies resource strain. Rising energy demand also fuels inflation, disrupts daily life and heightens social and environmental risks. These interdependencies highlight the urgent need for integrated resource strategies. For a deeper systems perspective, see the World Economic Forum’s Artificial Intelligence’s Energy Paradox: Balancing Challenges and Opportunities.

AI data centres consume vast amounts of water for cooling. By 2030, global data centre water use is projected to reach 450 million gallons per day – equivalent to the daily use of ~5 million people – up from 292 million gallons in 2022. With two-thirds of US data centres located in high-stress water regions, risks of stranded assets, regulatory crackdowns and reputational damage are mounting.

Water is also consumed in electricity generation and chip manufacturing. At scale, AI’s water footprint could compete directly with agricultural, municipal and industrial needs, making water a strategic constraint in sustainable AI growth.

AI infrastructure relies on a wide array of materials – from steel, aluminum and silicon to lithium, cobalt, nickel, copper and rare earths – whose production requires significant energy and water, often with heavy environmental impacts.

Many are scarce or concentrated in ecologically fragile and geopolitically sensitive regions, posing strategic risks to scaleability and resilience. For example, 70% of cobalt comes from the Democratic Republic of Congo, where child labour and corruption are endemic; lithium extraction in South America consumes vast amount of water in arid zones; and China controls ~90% of global rare earth refining, heightening geopolitical risk amid US–China tensions.

With demand for critical materials expected to triple by 2030, supply insecurity, regulatory scrutiny and rising capital costs pose mounting challenges for investors and corporations.

As AI’s demand for energy, water and materials grows, communities face mounting resource scarcity and rising costs, while intensified withdrawals and emissions accelerate biodiversity loss.

Material sourcing is a major flashpoint: over 1,200 mining sites overlap with biodiversity hotspots, and nearly 800 disputes since 2005 have caused costly delays and reputational damage. In Chile’s Atacama Desert, legal action forced lithium producers to halve extraction, slowing global supply

For companies, weak stakeholder engagement jeopardizes permits and operations; for investors, community conflicts erode value; and for policy-makers, strong regulation is essential to safeguard ecological and social resilience.

AI-related energy risks have gained visibility, prompting public awareness and action. Yet focusing on energy alone cannot break the cycle of compounding environmental and operational pressures. In fact, isolating energy risks may intensify water stress and constrain the very data centres AI depends on.

These AI-energy nexus dynamics – spanning energy, water, materials, food and biodiversity – push against planetary boundaries while undermining business potential and social equity. Effective mitigation requires a total solution approach: integrated strategies that recognize interdependencies across the energy-water-materials-biodiversity nexus and align AI’s rapid growth with long-term sustainability.

To address AI-energy nexus risks and unlock long-term value, companies and investors must move beyond their narrow roles in the AI value chain. They should pursue strategies that create shared value by advancing business goals while benefiting society and the environment.

Governments play a pivotal role by setting national ambition, enabling cross-sector collaboration and ensuring AI’s growth is resilient and sustainable through clear regulation, aligned incentives and public-private partnerships.

Here’s what stakeholders working across four crucial areas of the data centre and AI industry can do to ensure their work accounts for the energy-AI nexus:

The path forward is clear and urgent. Stakeholders who embrace integrated strategies across the energy-water-materials-biodiversity nexus, anchoring innovation in sustainability, will not only mitigate risk but also unlock resilient, net-positive growth. Those who act now will shape the future, lead transformative opportunities and ensure AI’s expansion strengthens both business and society.

The Global Future Council on Energy Nexus shares ideas and examples through its Energy Nexus Insights series, comprising blogs, articles and infographics; guides for public and private sector decision-makers; and sector analyses for managing the energy, food and water nexus in a politically, economically and socially viable manner.