A Texas Standoff: AI Growth Collides with Resource Limits

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Written by Aaron Studwell, Ph.D., Energy Meteorologist & Analyst (Fredericksburg, Virginia)

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Summary

Rapid AI expansion is driving a global data center "super cycle" centered in North America and Texas, sharply increasing electricity and water demand. Worsening drought and limited recharge across Texas expose planning gaps, forcing tradeoffs among cooling methods, grid reliability, and water supply for sustainable infrastructure growth.

Drought Conditions Across Texas

Drought risk across Texas is not uniform. Texas' drought risk is not uniform. The state's watersheds are a mosaic driven by basin-scale hydrology, reservoir storage, groundwater recharge, and seasonal precipitation volatility.

As of the February 10, 2026, U.S. Drought Monitor update, drought conditions are widespread and intensifying across Texas.

• Moderate to Exceptional Drought (D1-D4): 73.6% of the state
• Severe to Exceptional Drought (D2-D4): 40.8% of the state
• Extreme to Exceptional Drought (D3-D4): 17% of the state

The spatial pattern shows the most acute conditions across South Texas, the Hill Country and the Big Bend region. Prolonged precipitation deficits, high evaporation rates and depleted soil moisture are reinforcing drought severity. Approximates 17.8 million Texas residents in drought (D1 or higher) region, an increase of over 10% from the previous week's (February 3, 2026) reporting.

Hydrologic impacts are becoming increasingly visible. Reservoir storage across parts of South Texas has dropped to critically low levels. Lake Corpus Christi and Choke Canyon combined storage levels are 9.6% of normal. The San Antonio Express-News describes persistent drought stress in parts of Central Texas with reservoir levels well below normal. Specifically, the Edwards Aquifer storage starting the year are unusually low.

These levels result from multi-season rainfall deficits and pose significant supply risks to the population, agriculture, and industrial use. This has prompted tighter restriction stages in certain service areas. Even when extreme rain events occur, fast runoff does not necessarily translate into groundwater recharge. This yields "headline rainfall," which can coexist with long-lived aquifer and reservoir deficits.

Seasonal Rainfall Outlook for Texas

Texas enters the late winter and spring period with heightened vulnerability to water shortages. The IIR Spring Outlook (March through May) indicates that Texas will continue to experience below-normal rainfall levels. The NWS' summer forecast is for near normal rainfall. By the latter part of 2026, October through December, below-normal rainfall is forecast east of the I-35 corridor.



From a data-center perspective, the drought problem is not simply "is Texas dry?" Rather, the seasonal and annual precipitation projections shift from a broad-brush overview to "which basin, which source (surface vs. groundwater), and what reliability standard?"

AI Data Center Growth

The rapid growth of artificial intelligence (AI) growth is showing up on the ground as a full-stack infrastructure buildout: land, transmission, substations, gas supply, fiber-optic components, and increasingly, water. The United Nations Trade and Development group estimated that the 2023 global AI market was ~$189 billion. For 2026, Fortune Business Insights is projecting the market size to more than double, increasing to ~$375.9 billion.

Industrial Info Resources (IIR) characterizes this as a $3.2+ trillion global data center "super cycle," with over 7,200 active projects in planning/engineering stages worldwide. The highest percentage is in U.S. & Canada with almost 70% of the capital expenditure and more than 40% of the total development. Europe is also active in this cycle with almost 15% of the global spending, representing 20% of the project work. Data center growth is also noted across China, Southeast Asia and Latin America.

This development "super-cycle" is forecast to push domestic AI electric demand from ~23 GW in 2023 to ~90 GW in 2030, representing a nearly 300% increase. If this target is met, AI demand will represent an increasing share of the U.S. electricity usage.

North America is also where the "time-to-power" problem is pushing design choices. IIR notes that grid and generation accessibility has become a top siting criterion. Additionally, liquid cooling is no longer optional for leading-edge AI and high-performance computing (HPC) loads.

Texas sits directly in the epicenter of this expansion. IIR research places the state among the top U.S. development hubs, citing $517 billion in active data-center infrastructure buildout value. The thought process is familiar for the state: abundant land, fast-growing load, proximity to generation and natural gas, and a market structure that has historically supported rapid industrial-scale interconnection.

A new factor is that AI workloads are compressing timelines and increasing areal and computational density. This is driving gigawatt-scale campuses that behave more like heavy industry than traditional commercial real estate.

Water Usage in Data Centers

Water has graduated from a secondary to primary constraint through the development "super cycle." AI workloads concentrate extreme power density, making heat rejection a primary engineering constraint. Currently, many facilities depend on evaporative cooling, either directly or via cooling towers. From an energy perspective, these techniques are efficient; however, they impose significant consumptive water demand. This environmental strain is exacerbated in hot climates and during peak-load seasons.

It is estimated that large data centers can consume up to ~5 million gallons per day. This volume is the equivalent of a town with up to 50,000 people. The AI industry is responding with innovative cooling approaches. Successful implementation would position the industry with to reduce water and energy usage.

For Texas specifically, recent analysis by the Houston Advanced Research Center, frames the issue as a statewide planning gap. The report cites an estimate that Texas data centers used ~25 billion gallons in 2025. If project development moves forward as anticipated, annual water usage could approach ~160 billion gallons. This would represent about 2.5% of the state's water usage.

Recent IIR analysis notes a "structural blind spot" in this "super cycle." While grid planning is adapting to the electric load, water planning and permitting process lags the speed of construction. This gap is leaving utilities and municipalities to negotiate supply assurances project by project.

An interesting dichotomy arises with a potential water and power trade off. In some climates, air-based cooling can reduce direct water usage but may increase electricity consumption. In Texas, this becomes a notable issue during extreme heat events, which are times of elevated electricity consumption. Conversely, water-based cooling can reduce electricity intensity but transfers risk to local water supply reliability.

How Does Texas Move Forward?

The near-term AI outlook is for acceleration of data-center development. The demand driver is multilayered with projected growth of AI adoption, enterprise solutions and industrial digitalization. The global project pipeline is flowing fast with no end in sight.

IIR's global analysis, with thousands of projects and multitrillion-dollar capital spend, shows momentum that will not be solved by any one permitting shift or single technology improvement. The Texas buildout remains highly plausible given the scale already identified in IIR's project-value totals and the state's role in meeting fast-turn, high-density load.

The "water usage" discussion will likely shift from the broad "data centers use water" claims to site-specific accounting. The path forward would include require details of the withdrawal source, consumptive loss vs. return flow, seasonal peak demand and contingency planning for multi-year drought.

Policy attention is already rising across Texas. Houston Chronicle coverage points to an increased scrutiny of water planning. The most important mitigating levers are likely to be cooling architecture, impacted water sources and water reclamation, and load management. This would request shifting some workloads to off-peak hours when cooling and grid stress are highest.

Regarding the outgoing drought, the critical outlook focus is volatility, rather than a single deterministic "wet vs. dry" call. Basin conditions can stay stressed even amid episodic heavy rain. Reliability planning needs to be built around worst-case multi-season deficits.

The AI data-center boom and Texas drought risk are converging into the same operational question: Can critical infrastructure be scaled without converting local water scarcity into a limiting constraint?

The answer relies on future engineering choices, the evolution of transparent resource accounting, and aligning grid, water, and land-use planning on timelines that match the pace of AI infrastructure deployment.

For a look at specific projects, including power infrastructure, as well as the legislation and policies affecting the Texas data center rollout, see February 19, 2026, article - Data Centers Bring Critical Water Challenges to Drought-Ridden Texas.

Key Takeaways

• AI infrastructure surge: A $3.2+ trillion global data-center buildout is underway, with North America capturing ~70% of capital spending and Texas emerging as a primary hub due to land, power access and rapid interconnection capabilities.
• Explosive power demand: U.S. AI electricity demand could rise from ~23 GW in 2023 to ~90 GW by 2030, reshaping grid planning and elevating siting priorities around reliable generation and transmission access.
• Water becomes a primary constraint: Large data centers may consume up to 5 million gallons per day; Texas usage could approach ~160 billion gallons annually by 2030, exposing gaps between grid planning and water-resource permitting.
• Drought intensifies supply risk: With 73.6% of Texas in drought and critically low reservoir and aquifer levels in parts of South and Central Texas, water reliability is emerging as a limiting factor for industrial expansion.<./LI>
• Power--water tradeoffs drive design choices: Cooling strategies now balance electricity efficiency against water consumption, pushing site-specific planning, reclaimed water use, and workload shifting to mitigate grid and drought stress.

For more information on Texas data centers, water needs, meteorological patterns including a seasonal rainfall outlook, see February 19, 2026, article - Data Centers Bring Critical Water Challenges to Drought-Ridden Texas.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).