Texas Manufacturing and AI Boom Hinges on Access to Affordable Water
October 30, 2025 – As the Trump administration pushes forward with policies to revive U.S. manufacturing — including tariffs, regulatory reform, and easier credit — Texas is once again in the spotlight. The state’s vast land, strong energy infrastructure, and central location make it an attractive hub for industry. But one key question looms large: Can Texas deliver enough affordable water to fuel its manufacturing future?
Water has emerged as a defining constraint — not just for traditional manufacturing like paper, chemicals, and metals, but also for the rapidly growing data center and semiconductor sectors. With the rise of AI and cloud computing, sprawling data centers in North Texas and the Austin area now consume millions of gallons annually for cooling. That puts them in direct competition with other industrial and municipal users.
Unlike electricity, there is no universal cost per gallon for industrial water. Each new source — whether a drilled well, a dammed river, or recycled wastewater — requires investment. Economically, the return on that investment depends on how much value each gallon produces. A dollar’s worth of notebook paper, for example, may require two gallons of water, while the same two gallons could yield up to ten dollars’ worth of semiconductor chips.
This efficiency gives tech manufacturers more flexibility in site selection. Semiconductor plants, like the new Samsung and Texas Instruments facilities, can operate profitably even with higher-priced, treated water, often recycling much of what they use. Meanwhile, water-intensive paper and chemical industries tend to favor East Texas, where rainfall is abundant and water is cheaper.
For Texas to sustain growth in both heavy industry and high-tech sectors, ongoing investment in water infrastructure and recycling technology will be critical. The state’s economic future — and its role in the national manufacturing revival — may depend as much on the flow of water as on the flow of capital.
