Cooling, Water and Data-Centre Construction Supply Chain — October 23, 2026
Morgan Stanley projects a 32 GW power shortfall for U.S. data centers through 2028, exposing physical limits to the AI buildout. Meanwhile, community opposition to water usage is intensifying, with new analyses confirming that most new AI facilities are being built in drought-affected regions. Supply chains remain constrained by multi-year transformer lead times and a critical shortage of skilled electricians and construction labor.
Cooling, Water and Data-Centre Construction Supply Chain — October 23, 2026
Morgan Stanley Warns of 32 GW U.S. Power Shortfall
Morgan Stanley has revised its AI power demand forecast upward by 43% to 97 GW through 2028, revealing a net shortfall of 32 GW in the United States. This gap highlights the severe physical constraints on the AI infrastructure buildout, suggesting that energy availability, rather than capital, is becoming the primary bottleneck for hyperscale expansion.
Community Opposition Intensifies Over Water Usage
A new analysis by Rest of World highlights growing global resistance to data center water consumption, noting that local communities are increasingly pushing back against facilities that strain local resources. This sentiment is echoed in a USA Today and Guardian analysis confirming that a majority of new AI data centers are being constructed in drought-hit areas, exacerbating local water scarcity concerns.
NVIDIA Promotes "Near-Zero" Water Cooling in Europe
NVIDIA announced that its DSX reference designs, adopted by a European ecosystem, utilize closed-loop liquid cooling and dry coolers to achieve near-zero facility cooling water consumption. The company claims this approach could save up to 54 million liters of water annually, offering a potential solution to the water-use disputes plaguing the industry.
65% of Announced Capacity May Never Materialize
Business Insider reports that analysts estimate nearly two-thirds of announced data center capacity may never be built, a phenomenon referred to as "bragawatts." This discrepancy between announced plans and physical reality is driven by systemic bottlenecks, including power grid interconnection delays and supply chain constraints for critical components like transformers.
Local view
Arizona Construction Jobs Boom
Local media in Arizona report a surge in construction jobs driven by the influx of AI data centers. AZFamily notes that while the technology is high-tech, the physical buildout still relies heavily on skilled tradespeople, including electricians, welders, and HVAC technicians, creating a significant demand for local labor.
Texas Faces Grid and Water Permitting Uncertainty
Legal analyses indicate that Texas has paused certain data center approvals due to concerns over grid stability and water usage. Directives from the Public Utility Commission and the Texas Commission on Environmental Quality are creating uncertainty for projects seeking interconnection or state permits, signaling a shift toward stricter regulatory scrutiny.
Context & numbers
Transformer and Switchgear Lead Times
Supply chain constraints remain severe, with industry trackers reporting that power transformer lead times have stretched to 3–5 years, significantly up from pre-2020 baselines. Additionally, switchgear lead times are averaging 44 weeks, creating compounding delays for data center developers trying to meet aggressive AI capacity targets.
Immersion Cooling Market Growth
The market for data center immersion cooling fluids is projected to grow from $0.23 billion in 2026 to $1.06 billion by 2033, according to a new report by MarketsandMarkets. This growth is driven by the increasing density of AI racks and the need for advanced thermal management solutions beyond traditional air cooling.
Power Demand Forecasts
The global AI data center power and cooling infrastructure market is expected to reach $164.8 billion by 2031, driven by a 20.9% CAGR. This growth reflects the urgent need for resilient backup systems and advanced liquid cooling as power densities in AI halls continue to rise.
On the radar
- Electrician Shortage: Microsoft has identified the shortage of electricians as the #1 problem for data center construction, with over 300,000 workers needed and 20,000 retiring annually.
- Contractor Capacity: The ENR Top 600 report highlights that while data centers are driving revenue growth for major contractors, rising risks and labor shortages are testing the industry's ability to scale capacity.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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