Record heat and violent storms have turned climate into the digital-infrastructure industry's costliest operating risk.
As a record-breaking heatwave bakes Europe and pushes its power grids toward failure, the artificial intelligence industry is confronting a quieter version of the same emergency inside the buildings that keep it running.
The heat has already exposed how brittle modern infrastructure becomes when temperatures spike. An air-conditioning overload forced the Uffizi Galleries in Florence to close. A heat-related transformer failure cut power to roughly 38,500 homes in northwestern France. In the south of the country, a nuclear plant powered down because conditions made safe operation impossible. The United Kingdom logged its hottest June day on record, surpassing a high that had stood since 1976, while parts of Spain and Portugal pushed toward 44 degrees Celsius. Researchers with the World Weather Attribution network described the event as the worst heatwave Europe has ever recorded, and the World Health Organization called it a health emergency, noting that heat has killed an estimated 200,000 people across the continent over four years.
Data centers were designed to run hot. The thousands of AI chips inside them throw off punishing amounts of heat, and holding that heat in check is the single largest non-computing expense most operators carry. A heatwave strikes that vulnerability head-on, and it does so at the precise moment the electricity grid serving the facility is closest to breaking.
That collision is now surfacing in the numbers insurers watch most closely.
Severe weather climbs to the top of the loss column
Over the past three years, severe weather has become the leading cause of loss in Zurich's U.S. data center builders' risk portfolio, accounting for about a third of the insurer's losses there. Patrick McBride, the company's head of international construction, told CNBC that the change has rewritten how every new project is evaluated. "Severe weather is no longer something that can be treated as a background exposure," he said.
The dollar figures behind that statement are large. McBride described individual sites holding roughly $3 billion in assets, with more than a mile of frontage open to storm damage.
A study released in June by the climate analytics firm First Street quantified the wider exposure. After examining 97 data center markets around the world, the firm concluded that 79% of global capacity sits in places facing elevated risk from acute hazards such as flooding, extreme wind, wildfire, and drought. More than half of that capacity also contends with chronic climate stress, the slow kind that erodes cooling efficiency and drains local water supplies year after year. First Street expects worldwide capacity to nearly double again before the decade is out.
The money at stake has put the entire insurance market on alert. S&P has estimated that climbing demand for data center coverage could generate $10 billion in fresh premiums during 2026. A separate study by the Lloyd's insurer MS Amlin found that 51% of planned U.S. projects, worth a combined $670 billion, sit in states heavily exposed to severe convective storms, the hail-and-wind systems that hammer wide roofs and exposed cooling gear. AM Best has gone further, describing the buildout as a major opening for property and liability insurers willing to write new kinds of coverage.
The problem, insurers warn, is that the models underpinning these policies were built for a calmer climate. First Street chief executive Matthew Eby said most underwriting for physical assets still leans on historical data, even though "the climate is no longer behaving the way the historical record would predict."
The buildout moved into harm's way
Some of the danger is self-inflicted. Cheap land and available power have dragged construction away from established hubs like Northern Virginia and into what the industry now calls frontier markets.
This year, 64% of capacity under construction sits outside the traditional clusters, according to McBride, in states such as West Texas, Tennessee, Wisconsin, and Ohio. Those regions lie directly in the path of tornadoes and hail, and the vast flat roof of a hyperscale facility makes an easy target. The cooling towers and rooftop heating-and-cooling units that keep a building alive sit out in the open, as does any on-site solar.
Several of the overseas markets developers are now eyeing carry the same heat exposure, including Brazil and the Iberian Peninsula, where summer records keep falling.
Jeremy Porter, First Street's chief economist, cautioned that fortifying the building itself solves only part of the equation. A hardened structure means little if the grid connection feeding it, or the access road serving it, gives out first. The surrounding community's own infrastructure can become a failure point too.
A data center is meant to run for 20 to 30 years. Many of the investors funding the current wave, Porter noted, are still pricing these assets on growth alone while treating climate as an afterthought, even though the choice of location locks in cooling and water costs for the life of the building.
When the grid and the servers overheat together
The harder problem is timing: a heatwave hits the data center and the power grid in the same instant.
Cooling already eats around 40% of a data center's energy under ordinary conditions, and that share rises as the temperature does. The spike lands exactly when millions of household air conditioners are pulling on the same wires. Mishal Thadani, co-founder of the grid-modeling firm Rhizome, framed it starkly: a data center needs the most power at the very moment the grid has the least to give.
He pointed to Turin, where temperatures near 38 degrees Celsius this past May put the city's underground cables under thermal stress and set off repeated blackouts. Now add a single facility drawing as much electricity as 100,000 homes to wires already buckling in the heat.
Europe delivered a live demonstration this month. On June 24, with conventional plants running flat out to meet cooling demand, Belgium briefly crossed an electricity price of one euro per kilowatt-hour at sunset.
The pattern is no longer rare. Two-thirds of the heatwaves France has logged since 1947 have arrived since 2000, according to Météo-France, and space cooling already consumed about 7% of the world's electricity in 2022, the International Energy Agency reports. The agency has warned of a feedback loop in which rising cooling demand burns more fuel and warms the planet, which in turn drives still more cooling.
The water problem the cooling fix doesn't solve
Heat is only half of the resource squeeze. The other half is water, and it has become the flashpoint for communities living alongside these facilities.
A large data center can pull up to five million gallons of water a day for cooling, about what a city of 50,000 people consumes. U.S. data centers used roughly 17.4 billion gallons directly in 2023, a number federal researchers expect to reach somewhere between 38 and 73 billion gallons by 2028. In Texas alone, one university study projected demand leaping from 49 billion gallons in 2025 to as much as 399 billion by 2030.
About two-thirds of the data centers built since 2022 sit in areas already under water stress, a Bloomberg analysis found.
The industry's signature fix addresses a smaller share of the problem than the headlines suggest. Nvidia used its latest server launch to introduce a closed-loop design that recirculates coolant and cuts on-site water use to near zero. Microsoft chief executive Satya Nadella told the company's Build conference in June that its newest facilities run on a loop filled once at startup and "can operate effectively with zero water consumption," likening a full year of use to that of a single restaurant. The first such Microsoft campus is already operating in Mount Pleasant, Wisconsin.
The catch lies outside the fence line. An analysis by Xylem and Global Water Intelligence found that on-site cooling will account for only about 4% of the extra water AI demands by 2050. Power generation will drive roughly 54%, with semiconductor fabrication responsible for the other 42%. Wiping out a facility's cooling water, in other words, leaves the two biggest sources of the industry's thirst fully intact.
The resistance is already tangible. During the first quarter of 2026, local opposition blocked more than 75 data center projects worth around $130 billion, according to Data Center Watch, as many as were stopped in all of 2025.
Designing for a climate that no longer matches the record
The companies driving the buildout insist they are adapting. Microsoft told CNBC it engineers its facilities to run reliably across a wide band of conditions, relying on site selection, redundant power, real-time monitoring, and tighter building envelopes to manage heat and storm risk.
The hardware is shifting as well. Nvidia says its newest AI servers can circulate cooling liquid at 45 degrees Celsius, far above earlier limits, and the company points out that raising chiller temperatures by a single degree shaves cooling energy by roughly 4%. Equipment that tolerates higher temperatures needs less aggressive cooling, and it draws less of both power and water at the very moments those resources are scarcest. Some operators are testing more radical approaches, including immersion cooling, which submerges servers in a heat-conducting fluid and packs them more densely, though cost has kept it from spreading widely.
The sharpest signal of where the sector is headed came from the cooling supplier Johnson Controls. Aaron Lewis, who runs its global data center business, said the firm recently watched a European client write a climate-change allowance into its building specification for the first time, engineering the facility for the temperatures expected decades from now rather than the ones in the record today.
