Arizona is on the brink of becoming a major hub for artificial intelligence in the U.S. The Grand Canyon state’s rise in prominence as a center for technological innovation coincides with concerns over water scarcity, but the question isn’t whether Arizona can sustain this growth; it’s whether lawmakers will allow it to thrive.

Arizona has a long history of adapting to the arid climate of the Sonoran Desert. Data centers are only the next step in the evolution of our economic development. The state has managed decades of population growth with novel policies that promote conservation and discourage waste.

It would be a mistake to impose regulations that would chill Arizona’s progress. Concerns about data center water consumption are overstated. Incentive-based policies can foster both conservation and growth, and Arizona can’t afford to freeze out the data center trend.

As Arizona faces water cuts and shrinking aquifers, data centers are becoming the subject of scrutiny. Agriculture accounts for approximately 70% of water consumption statewide, a staggering 4 billion gallons of water daily. In contrast, data centers use up to 5 million gallons of water daily; agricultural water use easily dwarfs the consumption of data centers.

Even other varieties of commercial water use surpass this data. In 2025, data centers in Maricopa County used 905 million gallons, in contrast to golf courses, which used 29 billion gallons.

Overall water use is exaggerated, but the potential for future water efficiency is underestimated; data centers are already seeking more sustainable cooling methods. For example, closed-loop systems that recycle cooling water reduve water consumption by “up to 70%.”

As cooling systems for servers and storage arrays become more advanced, following the likes of WaterSense toilets and irrigation systems, they become more water-efficient over time.

Penalizing data centers for water usage is not only shortsighted but could stifle the local tech industry.

More data centers would increase overall water demand in a state facing recent cuts, but this is a challenge that Arizona can manage. While Arizonans are right to be concerned about water, the state has led the way in water conservation. Despite massive population growth, water use is lower than it was in the 1950s.

For over a century, Arizona has pioneered water recycling programs for agriculture. The state has implemented incentive-based initiatives for turf removal and agricultural reimbursements for farmers to switch from flood irrigation to drip irrigation systems.

Policymakers should encourage tech firms to come to Arizona, rather than punishing them for water use. We should address the biggest driver of water use, cooling systems, with targeted tax incentives.

Arizona already offers incentives to data centers, but an additional tax break on efficient cooling systems would address concerns over the dwindling water supply. Not only will this reduce demand, but it will also ensure that the state remains competitive as it develops into a tech hub. Lawmakers should be mindful of water scarcity, but not at the expense of economic growth.

Arizona can’t afford to scare off investment with overly aggressive environmental policies.

Until recently, job opportunities have drawn people to Arizona. However, last year saw a steep decline in job creation, falling from 10th in the nation in job creation to 47th, the weakest performance in 15 years.

Some of Arizona’s biggest sectors were hit hardest. Manufacturing experienced a 1.3% decline in employment, with layoffs at Microchip and Intel. Real estate and construction have cooled off due to high interest rates, home prices, and rising costs.

Despite sluggish growth, tech jobs in Arizona have increased by 11% since 2019, and there have been billions of dollars in investment. If we stay on course, continued expansion could generate millions of jobs and billions in tax revenue over the next decade. If policymakers play it smart, Arizona doesn’t have to choose between conservation and growth.

Arizonans don’t have to choose between prosperity and our water supply – we can achieve both. Policies that incentivize conservation will not only preserve the environment but also strengthen the state’s economy and cultivate a business-friendly environment without deterring investment. Arizona’s future depends on innovation and a willingness to embrace it.

Peter Clark is an Arizona-based writer.