California's fast-growing data center industry is increasingly expanding into parts of the state already facing water shortages and economic vulnerability.

A report, The Intersection of Data Center Development, Water Availability, and Environmental Justice in California, examined operating and proposed data centers across the state using measures of water access and social vulnerability, according to Business Wire. 

Researchers found that newer, larger projects are no longer concentrated in major urban tech hubs. Instead, many are being proposed in smaller communities where water supplies are often more fragile.

The study identified the Central Valley and Imperial Valley as areas where water scarcity and socioeconomic vulnerability overlap most sharply; they also attract major new data center proposals.

Researchers reviewed five cases, including three existing facilities and two planned developments, to better understand how these projects could affect local water supplies and surrounding communities.

The concern extends beyond how much water any single data center uses. Many facilities rely on shared groundwater basins or imported water systems, meaning the strain can spread far beyond one town or project site.

"California's water system is already under significant stress, especially in groundwater-dependent regions that have been overdrawn and are increasingly affected by climate change," lead author Iris Stewart-Frey said, per Business Wire.

The report also identified a lack of transparency as a major challenge. Public information about both the quantity and type of water used by data centers remains limited, making it harder for communities, utilities, and policymakers to plan responsibly.

That matters because data centers are rapidly becoming essential infrastructure for the digital economy at the same time California continues to grapple with drought, shrinking water supplies, and longstanding environmental justice concerns.

When large water-dependent facilities are built in already stressed regions, it can become more difficult to balance the needs of residents, agriculture, ecosystems, and other industries.

Researchers warned that small communities may be especially vulnerable because they often have few water-source options and little financial flexibility to absorb increases in demand.

"As data centers continue to expand across California, we're seeing development move from cities into towns where water resources are already under strain and communities are more vulnerable," F. Noel Perry, founder of the nonpartisan think tank Next 10, which released the report, said, per Business Wire. "Without stronger safeguards, this growth risks compounding existing inequities — but with the right approach, it also presents an opportunity to build a more sustainable and inclusive model for digital infrastructure."

The report argues that California's AI and digital infrastructure boom cannot be separated from the physical resources required to support it.

"Water scarcity and socioeconomic vulnerability often go hand in hand, and as the rapid expansion of artificial intelligence drives demand for new data centers, communities are also facing a scarcity of key data," said Irina Raicu, internet ethics program director at Santa Clara University, per Business Wire.

For California to lead on both AI and sustainability, it will need to ensure the future of computing does not come at the expense of communities that already have the least water to spare.

"We can't manage what we cannot measure, and right now, data center water use is largely invisible," Stewart-Frey concluded. "At this time, it is not clear whether water use by data centers is going to be an issue in California, but we do not have much wiggle room when it comes to water supplies in the state."

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