Businesses and policymakers are racing to build an economy centered on AI, and it’s quickly becoming one of the biggest economic bets in history. Billions of dollars are flowing into numerous sectors to support it, and states are competing to attract investment while companies seem to announce major expansions every day.
The U.S. is trying to build the AI economy as quickly as possible, but these ambitions depend on something less visible: infrastructure.
In 2025, the American Society of Civil Engineers gave U.S. infrastructure a grade of C, while anticipating a $3.7 trillion infrastructure investment gap between capital flowing for improvements and what is required for infrastructure to be in solid working shape. What we have now is an infrastructure that includes the power grid, water systems, and broadband networks that data centers and AI-driven businesses rely heavily on. These are aging, but also mismatched to the economy nearly everyone is intent on building.
A CHANGE IN INFRASTRUCTURE NEEDS
Much of the U.S. power grid, along with water and connectivity systems, was built in the 1950s and 1960s. The planning models behind them assumed a steady population increase and a consistent growth in manufacturing sectors. While infrastructure was able to keep pace with the demand for decades, that is no longer the case. Today’s economy is powered by industries that are far more infrastructure-intensive than those they are replacing. Aging systems now carry more weight than they were designed for.
Artificial intelligence is one of the most visible drivers of this increased demand, with its reliance on hyperscale data centers. These draw enormous amounts of power and water, but that’s not the only sector that does. Semiconductor manufacturing, battery production, advanced manufacturing, and electrification are all scaling up at similar paces, making similar demands as a result. Chipmakers such as Intel, TSMC, and Micron, for example, consume and therefore depend on reliable power, high-quality and available water, wastewater treatment, transportation, fiber connectivity, and permitting systems capable of supporting sustained growth. But that raises questions around cities’ and states’ capacity to support those demands.
For decades, companies selected manufacturing sites based on known factors such as labor costs, taxes, transportation, and proximity to customers. While those considerations still matter, companies are also now asking a more basic question: Can the infrastructure support us, not just today, but for the next 20 years? In states like Virginia, Texas, and Arizona, access to reliable power, water, transmission capacity, and efficient permitting can determine not only where projects are built, but how quickly they move from announcement to operation. For the states competing for this investment, infrastructure is no longer a background condition, but rather one of the key advantages.
THE PRICE OF ADMISSION
Infrastructure is now a primary business consideration directly influencing investment decisions. Communities that modernize their infrastructure will be better positioned to attract the next generation of AI facilities, semiconductor plants, advanced manufacturers, and other high-growth industries. Those failing to keep pace risk losing projects and jobs, along with long-term economic opportunity. Modern infrastructure is becoming the price of admission.
Water illustrates this problem. Decades ago, communities planned their water systems around population, housing, and agriculture. They incorporated reservoirs, wells, pipelines, and eventually treatment plants into these plans, to find and deliver more supply. Today, just one AI campus, one semiconductor fabrication plant, or one battery facility can dramatically change local water demand. Water needs for manufacturing are about quantity as well as quality. As such, that requires planning for reuse, advanced treatment, resilience, and making better use of the water communities already have. Virginia’s recent statewide groundwater study examining future data center development concluded that future development cannot assume unlimited water.
Rather than questioning whether data centers should be built, the report asked if existing water infrastructure can sustainably support them. It found that future large facilities using evaporative cooling would struggle to secure sufficient groundwater under current conditions. This illustrates how infrastructure capacity is increasingly shaping economic development. But AI did not create these infrastructure problems. Data centers are exposing where previous infrastructure assumptions no longer match reality. The way we plan infrastructure must change.
FINAL THOUGHTS
The technologies shaping tomorrow’s economy depend on infrastructure—systems that deliver power, water, transportation, connectivity, and the capacity to scale alongside innovation. Modernizing those systems is an economic strategy. The communities and businesses recognizing that shift will be best positioned to compete in the decades ahead. The future needs infrastructure designed for the economy we’re creating.
Kevin Gast is cofounder, CEO, and chairman of VVater.
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