Data centers are becoming a crucial driver of economic growth in the U.S., with analysts suggesting that without significant AI investments, GDP could stagnate by 2025. However, the expansion of these facilities hinges on an often-overlooked resource: water, essential for cooling their hardware. Companies like Xylem and American Water Works stand to benefit from this trend, as their products and services are vital for managing water infrastructure and efficiency in data centers.

Xylem, which reported a 4% revenue increase to $2.4 billion last quarter, is advancing technologies that enhance water recycling and cooling, positioning itself well for the anticipated surge in data center investments. Meanwhile, American Water Works is set to grow through regulated returns on capital investments and strategic acquisitions, including a merger with Essential Utilities, further solidifying its market presence.

Investors should approach water-related stocks with caution. While both Xylem and American Water Works are poised to benefit from increased water consumption linked to data centers, broader water usage trends and potential AI investment volatility could temper expectations for significant returns.

Source: fool.com