Data centres get a bad rap. They suck up our electricity, soak up our water, and create precious few jobs, at least directly. It’s why the tech industry is so keen to rebrand them as “AI factories”, a term which seems nothing if not industrious.
The four biggest US tech hyperscalers – Amazon, Meta, Alphabet and Microsoft – are projected to spend nearly $700 billion (about €603 billion) on these vast warehouses this year alone.
Even leaving aside the negative impact that could accrue if all this activity turns out to be nothing more than a high-tech soap bubble, the consequences for the environment are even more damaging.
According to the International Energy Agency, by 2030, data centres should consume 945 terawatt-hours (TWh) of electricity, more than the current usage of France and Germany combined, and over double the amount used in 2024.
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In Ireland, data centres account for about 20 per cent of electricity consumption, a figure national grid operator EirGrid predicts will tip 30 per cent by 2030.
Given the ancillary growth in energy demand as a result of electric vehicles and heat pumps, such a rise in data centres represents a significant drain on already stretched supply.
But it will have an impact on carbon emissions too. Friends of the Earth has warned that Ireland’s unprecedented growth in data centres is simply matching the deployment of renewable energy, contributing to an overall stagnation in Ireland’s progress toward reducing greenhouse gas emissions and our meeting of legally binding carbon budgets.
In other parts of the world, the challenges are even greater. Data centres also use copious amounts of water. In the US, it is estimated that one mid-sized data centre consumes more than a million litres of water a day, about as much as 1,000 households.
Data centres also depend on rare earth minerals; a term already often associated with trade wars and weaponised supply chains. In the meantime, demand for other critical minerals is already driving an international mining boom.
While such materials are sought because they are ultimately essential in the battle to reduce global carbon emissions, the extraction processes involved cause significant, and sometimes irreversible, destruction of ecosystems, biodiversity loss and water pollution.
As of early 2026, the Magnificent Seven stocks of Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia and Tesla account for about one-third of the US’s S&P 500 index, having roughly doubled over the past five years. That in itself poses a risk to investors.
But given the environmental risks associated with AI, should responsible investors now exclude big tech from their portfolios? Not quite, it seems.
“While the energy and water demand of AI is significant, responsible investors are increasingly emphasising the ‘transition’ aspect of sustainability rather than excluding big tech outright,” says Diya Iyer, investment and sustainability analyst at Davy.
“It’s important to recognise that these companies cannot rely on finite, traditional energy sources to support their growing operational needs. As a result, the focus is shifting from divestment to supporting and engaging with companies as they move toward cleaner, more sustainable energy solutions.”
That’s so, even though some of the Magnificent Seven are turning to nuclear energy, in the form of small modular reactors, to power their data centres.
“The treatment of nuclear energy within the EU’s sustainable finance framework has evolved,” says Iyer.
“The communications emphasise Europe’s need for energy security, particularly in light of recent geopolitical tensions. Within this context, nuclear energy is increasingly viewed as a practical pathway to achieving emissions reduction goals while maintaining reliable, secure power.”
Though perhaps counterintuitively for responsible investors, this means that investing in tech companies using nuclear-powered data centres is becoming more feasible within sustainability considerations.
Says Iyer: “The EU taxonomy has included nuclear energy under enabling and transition activities, which provides clarity to sustainable investors that the EU sees nuclear energy as a part of the solution.”
Some investors will, of course, gravitate instead towards those tech companies that are betting on renewable solutions instead.
“Investors recognise that AI companies will increasingly need to rely on alternative energy sources to meet their rising power demands. To identify and reward those prioritising renewables, investors can embed environmental, social and governance [ESG] integration throughout their investment process. ESG integration helps reveal long‑term risks and opportunities, enabling investors to focus on companies positioned for sustainable growth,” says Iyer.
“When ESG factors are incorporated into investment analysis, recognising and rewarding these forward‑looking companies becomes a natural outcome.”
