• 79% of data centers are exposed to climate hazards, 54% face chronic heat or drought
• Higher temperatures lead to more cooling demand, creating a vicious circle
• Component longevity is also at risk from heat and other impacts

According to new First Street research, four in five (79%) or the world's data center capacity is exposed to climate hazards like flooding, wildfire and winds, with more than half (54%) of data centers located in areas that face chronic heat or drought stress.

With hyperscalers investing billions to keep up with demands created by AI, First Street stresses that today's decisions could impact cloud computing for years to come.

But even without further investments, rising temperatures and the effects of climate change could put existing facilities under further pressure.

Hyperscalers are building data centers in at-risk areas

Besides the obvious risk of component damage, higher temperatures also mean that data centers need more cooling than they previously did, driving up electricity and water consumption. Because chips and other components operate best at an optimal temperature, higher temperatures could even cause them to fail sooner.

Flooding, winds and storms also threaten electrical systems, network connectivity and fiber networks, potentially leading to outages.

The revelation comes just weeks after a separate study from insurer MS Amlin found that half (56%) of all new projects are being located in disaster-prone areas.

"Most underwriting for real assets still uses historical data, but the climate is no longer behaving the way the historical record would predict," CEO Matthew Eby said.

But with part and utility costs soaring, companies are being forced to reduce costs elsewhere, including locating campuses in cheaper areas that are often more at-risk. With companies already having to consider compute capacity, power availability, connectivity and local opposition, "climate risk is becoming an increasingly important determinant of long-term performance," First Street warns.

"Together, these risks affect NOI stability, cash flow durability, and long-term asset performance," the company added.

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With several years’ experience freelancing in tech and automotive circles, Craig’s specific interests lie in technology that is designed to better our lives, including AI and ML, productivity aids, and smart fitness. He is also passionate about cars and the decarbonisation of personal transportation. As an avid bargain-hunter, you can be sure that any deal Craig finds is top value!