There’s plenty to worry about with artificial intelligence: Will it put people out of work? Is it cheapening our art? Will humans eventually be subservient to all-knowing AI overlords?

Questions like that tend to drown out other nontrivial repercussions, like how much water it consumes. Water, you may have noticed, isn’t an abundant resource everywhere. Nor is it cheap. 

Have a Cool Drink

Whether it’s a car, computer, or nuclear reactor, machines need to stay cool or risk overheating. That’s why when crypto really took off, digital miners set up shop in cold places or communities with cheap energy bills. Air cooling systems — i.e. mega fans — are one option, but that gets expensive, especially in these days of high energy costs. If you’re a Big Tech firm with a data center that contains hundreds if not thousands of complex computers endlessly processing, developing, and storing information, you’re going to need something superior and cheaper — water.

Microsoft, Meta, and Google have all significantly boosted their water usage to cool their data centers amid the generative AI boom, the Financial Times reported over the weekend. In 2022, the latest figures available, Microsoft increased its water consumption 34% to roughly 1.7 billion gallons, Google by 22%, and Meta by 3%. And those increases are only likely to continue:

• AI demand is likely to drive up water withdrawal to between 4.2 billion and 6.6 billion cubic meters by 2027, according to academics cited by the FT. That’s about half the amount of water consumed by the UK’s 68 million people each year.
• It’s not like Big Tech has its own special access. They get their water from the same place we do: municipal watersheds. Shortly before OpenAI finished training its latest AI model, ChatGPT-4, one of its data center clusters in Iowa allegedly consumed 11.5 million gallons of water, or 6% of all the water used in the district, according to a lawsuit filed by residents. 

You Look Parched: Water consumption levels could be even higher than what’s being estimated, and researchers are calling on Big Tech for greater transparency. Katie Crawford, a research professor at the University of Southern California, told the FT that without better information it’s difficult to gauge AI’s environmental and societal impacts, especially “when many parts of the planet are experiencing deep and extended droughts, and fresh drinking water is already a scarce resource.” But there’s no time for those concerns when the world desperately needs bland high school essays, soulless clickbait articles, and images of Pope Francis in a puffy Balenciaga coat.

The rising tide that is Nvidia is lifting boats across the Atlantic, too. 

The Silicon-Valley based AI chipmaker has been on a stock market run that’s close to unprecedented: After more than tripling in 2023, Nvidia shares have jumped nearly 60% already this year, making the company the fourth-most-valuable company in the world with a market cap of nearly $2 trillion. They’ve noticed across the pond.

Junk Me

In the wake of another stellar earnings blowout last week, Nvidia, as Deutsche Bank strategist Jim Reid told the Financial Times, was transforming “the mood of the whole global risk market.” That’s helped investors feel better about risk overall. Case in point: European junk bonds, which are attracting increased attention from investors who have long shunned them. In fact, BlackRock data cited by the FT showed that a record $1.2 billion has flowed into European-listed ETFs that hold the region’s high-yield bonds, compared with just $200 million for comparable ETFs that invest in US junk bonds. It’s the first time that European investors have favored their own junk bonds over the US’ since 2019:

• Part of this pivot is a bet on Europe’s increasing chances of its own “soft landing” — several of Europe’s economies haven’t suffered as much pain as expected, while cooling inflation has buoyed hopes that central banks will be encouraged to cut rates, helping the fortunes of companies issuing junk debt.
• On this side of the Atlantic, the opposite is true: a resilient economy still seems to have the Federal Reserve hesitant to start cutting interest rates, meaning the “higher for longer” scenario could hurt junk issuers here.

Red Tape Blues: Not every European investor is feeling particularly perky about the region’s immediate prospects. Oil billionaire Jim Ratcliffe told the FT over the weekend that the European Commission’s Green Deal — a plan to push the continent toward decarbonization — is so full of “suffocating bureaucracy” that it’s pushing companies to invest outside the bloc to build any new capacity. Considering Ratcliffe recently managed to put together a few shekels to buy more than a quarter stake in $6 billion football club Manchester United, the complete deindustrialization of Europe doesn’t appear to be a near-term threat.

The Oracle of Omaha has seen the future. It’s meh. 

In his latest letter to shareholders, Warren Buffett — the 93-year-old founder and CEO of the investing conglomerate — said there’s “no possibility of eye-popping performance” in the coming years. We all might as well enjoy some Cherry Coke until something interesting comes along.

Not Much Going On

Berkshire has made plenty of deals to acquire or pump money into companies that supercharged the firm’s performance — Geico, Dairy Queen, insurance company Alleghany. At the start of 2022, it poured more than $50 billion into stocks. But those days look to be in the past for now.

“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett said in his letter. “Outside the US, there are essentially no candidates that are meaningful options for capital deployment at Berkshire.”

The company will pursue anything that looks unique and lucrative but right now, not many businesses seem to excite Buffett — Berkshire Hathaway’s record cash pile of $168 billion can attest to that: 

• When nothing on the market looks attractive, Berkshire dumps what it can and turns inward. The firm bought $2.2 billion of its own stock in the fourth quarter of 2023, totaling more than $9 billion for the whole year. It also sold $24 billion of equities last year.
• Berkshire Hathaway is also known for its conservative approach to trading. In his letter, Buffett took a crack at Wall Street speculators and day trading apps that encourage people to move their money around without much thought.

“Markets now exhibit far more casino-like behavior than they did when I was young,” he said. “The casino now resides in many homes and daily tempts the occupants.” 

Building an Empire: Buffett also took time to commemorate his friend and business partner, Charles Munger, who died last year at the age of 99. “In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten,” he said. “Berkshire has become a great company. Though I have long been in charge of the construction crew, Charlie should forever be credited with being the architect.”