Commerce Secretary Howard Lutnick dismissed concerns about artificial intelligence data centers consuming water, labeling the criticism as "propaganda by our adversaries." His comments contradict federal research indicating a sharp rise in water usage across the sector.

Lutnick told CNBC that "data centers don't use water," arguing that cattle are the primary water consumers in the United States. He framed the pushback against large AI infrastructure projects as an attempt to slow down technological progress.

Federal Research Contradicts Claim

Data from the Lawrence Berkeley National Laboratory shows U.S. data centers directly consumed about 66 billion liters of water in 2023. This figure represents a significant increase from 21.2 billion liters recorded in 2014. The laboratory estimates that hyperscale facilities alone could consume between 60 billion and 124 billion liters annually by 2028.

Industry Variance and Cooling Methods

The Data Center Coalition notes that water use varies significantly by facility. Some centers rely on air cooling, while others utilize water or hybrid systems. A study in Virginia found that 83% of data centers there use as much water as, or less than, a large office building. Operators are increasingly adopting closed-loop and waterless cooling systems to mitigate consumption.

Political and Regulatory Backlash

President Donald Trump has intensified his defense of data centers, urging communities to "let Data Reign" and warning opponents could become "backwards and poor." This stance drew sharp criticism from Alexandria Ocasio-Cortez and Republican Marjorie Taylor Greene.

The administration has addressed infrastructure costs through an expanded Ratepayer Protection Pledge. This initiative requires participating companies to fund new power generation and grid upgrades rather than shifting costs to households. The pledge now covers about 80% of U.S. electricity deliveries.

Congressional Scrutiny

Congress is examining water use through the House Energy and Commerce Committee, which is holding a hearing on draft legislation. The proposed rules would make data center developers responsible for water infrastructure costs instead of local families.

Industry supporters acknowledge the political risks involved. Texas Governor Greg Abbott stated that developers "dug their own grave" by failing to engage communities. Investor Kevin O'Leary urged operators to be clear about water usage and emissions to maintain public trust.

What the Numbers Show

Federal data reveals that water consumption in U.S. data centers more than tripled over a nine-year period, rising from 21.2 billion liters in 2014 to 66 billion liters in 2023. This trajectory challenges the assertion that the sector does not use water, highlighting a growing resource dependency alongside AI infrastructure expansion.

U.S. Commerce Secretary Howard Lutnick has publicly pressured Samsung Electronics and SK Hynix Inc. to construct local AI memory fabs to secure America's artificial intelligence hardware pipeline. Speaking at a Micron Technology Inc. event, Lutnick signaled a reordering of the global tech supply chain, asserting that because U.S.-based Micron is aggressively scaling up domestic manufacturing, its Asian rivals will ultimately have “no choice but to follow” and invest on American soil.

Lutnick confirmed he is actively discussing expansion plans with executives from both Samsung and SK Hynix. He acknowledged that inviting foreign competitors onto U.S. soil might create domestic friction, noting that the Micron CEO “may not be thrilled about rivals increasing their investment in the U.S.” However, he emphasized that national priorities take precedence, stating that “strengthening America’s semiconductor supply chain is more important” than individual corporate rivalries. The ultimate goal, he stressed, is “to protect U.S. companies and intellectual property created in the United States.”

The pressure arrives at a pivotal moment for the industry. SK Hynix will begin trading American Depositary Receipts (ADRs) on Nasdaq on Friday, July 10, to raise capital for capacity expansion. Reports state that Samsung and SK Hynix collectively plan to invest $880 billion over the coming years to meet skyrocketing AI memory demands.

Geopolitical Tensions and Market Reactions

Lutnick also navigated geopolitical tensions regarding Apple Inc.’s pending request to source memory chips from Chinese firms like ChangXin Memory Technologies and Yangtze Memory Technologies Co. Ltd. The Commerce Secretary's stance underscores a broader strategy to reduce reliance on foreign adversaries for critical technology components.

Separately, market sentiment around SK Hynix remains bullish. On Mad Money Thursday, Jim Cramer called SK Hynix a major beneficiary of surging AI memory-chip demand. “We know the memory chip business is on fire and if you’re willing to accept the volatility, I think you could do a lot worse than this one,” Cramer said. He noted the stock remains attractively valued at roughly seven times expected earnings, adding, “Their memory chips may sell at a huge premium, but the stock trades at a discount.”