Water is fast becoming one of the defining fights around the AI buildout.

Why it matters: After spending much of the past year defending data centers' electricity demands, major tech companies driving the AI boom are increasingly making the case that their water use is manageable too.

Driving the news: Over the past several weeks, Google, Amazon and Microsoft have each launched new efforts to explain and justify the water use of their AI infrastructure, highlighting measures such as water replenishment projects, recycled-water use and new cooling technologies.

• Nvidia — the world's dominant AI chip maker — claimed this week that water concerns could be largely addressed by its latest generation of technology.

What they're saying: "The growing conversation about water and energy use by data centers has forced these companies to scramble, to rethink what they're doing and to become more transparent about what they're doing," said Peter Gleick, co-founder of the Pacific Institute, a California-based water research nonprofit, and one of the nation's leading water experts.

• "They're starting to understand the reputational risk of the massive rollout of data centers that have big energy and water footprints."

State of play: Such worries are infiltrating debates at all levels around the world.

• United Nations Secretary-General António Guterres called for more transparency on data centers' energy, water and land use in a speech earlier this week in London.
• Also this week, lawmakers in Virginia — which has the world's highest number of data centers — moved toward clamping down on the most water-intensive methods of cooling.

How it works: Water-based cooling systems generally use less electricity than air-based systems, creating a tradeoff between water consumption and energy demand.

Zoom in: Water-intensive cooling has historically been favored because it uses less energy and is less expensive, but it is facing growing public opposition.

• "However, the court of public opinion has spoken loudly that consuming water for cooling on data centers is no longer an acceptable method," said Aaron Bilyeu, chief development officer of Cloverleaf Infrastructure, a data center developer.

Zoom out: For all the focus on cooling technology, much of a data center's broader water footprint comes from the electricity it consumes rather than water used directly at the facility — if it is powered by fossil fuels or nuclear power.

What's next: Transparency is emerging as a key next phase of AI water worries.

• Tech giants, including Microsoft and Google, are set to release annual environmental reports in the coming weeks that could shed more light on their water use.

What we're watching: Guterres added urgency to those moves when he proposed an AI environmental transparency initiative this week.

• "I am calling on every major AI company to measure and publicly disclose the full environmental impact of its systems — carbon, water and land footprints," Guterres said.

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Compared to other major industries, data centers actually use far less water — a point tech executives are quick to point out and some independent experts agree with.

"The projections for water demand are not eyebrow-raising," said Sarah Porter, director of the Kyl Center for Water Policy at Arizona State University.

• Concerns about water are largely a "substitute for concerns people have for this fast-developing industry."

Yes, but: Experts, including both Peter Gleick of the Pacific Institute and Porter, caution that aggregate water-use figures can obscure local impacts, particularly in drought-prone regions where even modest demand can become contentious.

• "The important point is: How much water does a data center use in the region where it's taking the water from?" Gleick said.

The bottom line: Comparisons to other industries may do little to ease concerns in communities facing the prospect of a big new industrial neighbor.

New Dallas Fed analysis explains why the Iran war didn't wreak nearly as much havoc on the U.S. economy as prior oil supply disruptions that rocked the country in the 1970s.

Why it matters: Two major shifts in the energy economy are working in tandem to ease the effect of price spikes and supply shocks.

How it works: If you're reading this newsletter, you probably know already about the rise of U.S. oil production and exports, and decreased import reliance.

• And you may know that overall, GDP is just much less tethered to oil than in the past, as you can see in the chart above.
• That's thanks to less use of oil to produce electricity; more efficient vehicles and the more recent growth of electric cars; and the economy's shift to less fuel-intensive service industries.

Driving the news: The Dallas Fed researchers' advance our understanding by digging into how these trends interact — and conclude the effect is much greater than the sum of its parts.

Stunning stats: If a loss of 15% of global oil supply — roughly equivalent the peak of the Iran crisis — occurred in 1980, it would have cut U.S. GDP by 5.6%, which is recession territory.

• Today, the same event "reduces growth by only 0.3 percentage points, one-twentieth of the 1980 decline," the researchers find.

The bottom line: "The U.S. has become substantially less exposed to major disruptions in global oil markets," they write.

Go deeper: Axios' Macro co-author Neil Irwin's coverage ... full paper ... summary blog post

Rep. Frank Pallone (D-N.J.), the top Democrat on the Energy and Commerce Committee, wants a data center moratorium "until we can find a way to ensure they don't harm our nation's air, water, and power bills," he said.

Why it matters: He's likely to chair the powerful committee if Democrats regain the House.

• Pallone's comments, in a legislative markup yesterday, are the latest sign of backlash against the infrastructure that Big Tech needs for the AI boom.

Catch up quick: A subcommittee yesterday endorsed a step that's closer to the current political and policy center of gravity.

• The energy subcommittee, by voice vote, backed the bipartisan "Ratepayer Protection Act."
• It pushes state regulators to consider policies that ensure data center developers cover costs of new generation and grid upgrades.
• The measure largely reflects tech companies' existing pledges and the direction that FERC is pushing regional grid regulators.

What we're watching: The bill "could give Republicans especially a counterpoint to growing data center backlash ahead of the November midterms," Capital Alpha Partners' James Lucier said in a note.

Friction point: John Miller of TD Cowen sees two policy camps emerging, with the progressive left favoring moratoriums while Republicans and centrist Democrats are fine with data centers if consumers don't foot the bill.

• The latter camp "currently commands the political high ground," he said in a note. But Miller also sees a growing divide within that make-them-pay camp between backers of "flexible frameworks" vs. backers of "specific federal requirements."
• "Disagreement could delay cost allocation legislation, resulting in popular support for an emboldened moratorium-style approach," he writes.

What's next: Energy and Commerce Chairman Brett Guthrie (R-Ky.) plans to bring the bill before the full committee, a GOP spokesperson said.

Back to gas pumps for a moment: This chart helps explain President Trump's pique at gas prices that have not tumbled as much as crude oil prices of late.

Why it matters: Trump told the Justice Department to probe whether the oil industry is gouging drivers — repeating several predecessors' moves when high gas prices make for bad politics.

Yes, but: Fuel market forces, not oil company scheming, explain why pump prices rise like a rocket when crude prices increase, but decline like feathers, analysts say.

Axios' Matt Phillips has more.

That's rooftop solar and battery player Sunrun's stock bump after rollout of a partnership with Tesla and smart thermostat company Renew Home to provide 16 gigawatts of capacity to tech giants and utilities.

Why it matters: It's a major new effort to aggregate lots of existing, distributed sources to meet the AI boom's voracious need for power ASAP.

• This "capacity-as-a-solution" idea is quickly deployable and eases pressure on grids, the companies said.
• Go deeper via Canary Media.