The AI boom is colliding with a new physical threat: extreme weather. A record-breaking heatwave across Europe is straining power grids just as data centers-packed with power-hungry AI chips-require more energy for cooling. Insurers and climate analysts now warn that severe weather has become the leading cause of loss in data center construction portfolios, and nearly 80% of global data center capacity faces elevated risk from flooding, fire, and high winds.
Severe weather now drives a third of losses in Zurich's U.S. data center builders' risk portfolio, up sharply in the past three years. Patrick McBride, Zurich's Head of International Construction, said many facilities are moving to suburban or rural areas where land is cheaper but historical weather records are thin. "Now we have $3 billion worth of assets with over a mile worth of exposure to these events."
The rising toll of severe weather on data centers
A recent study by climate risk analytics firm First Street found that 79% of global data center capacity faces elevated risks from acute climate hazards such as flooding, extreme winds, and wildfires. Those hazards can disrupt operations, increase downtime, and drive up insurance and repair costs. Joe Macejak, U.S. property digital infrastructure leader at Marsh Risk, said the question is no longer whether climate risks will hit the digital infrastructure buildout. "It's not a matter of 'if' climate risks will impact the digital infrastructure revolution, but rather how clients and stakeholders in the digital infrastructure industry identify, quantify, and manage these climate risks within their respective tolerances."
If those risks go unmanaged, Macejak added, businesses could face higher costs and operational shortfalls that "pose a threat to the capital stacks that are fueling the AI-driven data center revolution."
Where new data centers face heightened risks
This year, 64% of data center capacity under construction is outside traditional hubs like Northern Virginia and moving into frontier markets-West Texas, Tennessee, Wisconsin, and Ohio, according to Zurich's McBride. Those areas bring heightened risk of "tornadoes, hail and high winds wreaking havoc on vast roofs that have exposed HVAC systems, cooling towers and energy installations like solar." In Europe, data centers are migrating to the Iberian Peninsula, where temperatures are climbing. Brazil, an emerging market, also faces heat challenges.
"Severe weather is no longer something that can be treated as a background exposure," McBride said. "It is one of the first things we and the owners we work with look at."
Extreme heat stresses data centers and the electrical grid simultaneously. Cooling accounts for around 40% of a data center's energy use under normal conditions, and that share rises in a heatwave-exactly when air conditioning drives up grid demand. Mishal Thadani, CEO of AI software platform Rhizome, said, "Data centers need the most energy exactly when the grid has the least available to give." He pointed to Turin, Italy, where highs of 38°C in May put underground cables under thermal stress and caused repeated blackouts. "Now add facilities that each pull as much power as a hundred thousand homes. The heat and the load hit the same wires at the same time," Thadani said.
How operators are adapting design and cooling
Hyperscalers and equipment makers are responding. Microsoft designs its data centers to operate "reliably in a wide range of environmental conditions, with site selection, redundant systems, and real-time monitoring helping manage risks from extreme heat and severe weather," a spokesperson said. Nvidia said last week that its new AI servers can run their cooling liquid at 45°C, up from previous lower temperatures. Raising chiller temperatures by one degree can cut cooling energy costs by about 4%, according to Nvidia.
Aaron Lewis, chief commercial officer of global data center solutions at Johnson Controls, said the company tests cooling equipment to withstand various temperatures. Recently, for the first time, he saw a European client add a "climate change factor" to the specification so data centers are designed for future temperature rises. Lewis expects the pace of innovation driven by the data center boom to produce "a diverse set of systems and applications" that transfer heat more effectively, allowing operation under harsher conditions.
Why this matters for IT, development, and science professionals
For teams building or relying on AI infrastructure, climate risk is no longer a footnote in site selection or system design. The data center buildout is shifting into regions with more volatile weather, and cooling demands will only grow. Professionals in IT, development, and research need to factor extreme heat, grid instability, and new cooling requirements into resilience planning, cost models, and hardware specifications. The same AI workloads that drive demand are also pushing innovation in thermal management, creating opportunities to design systems that run reliably even when temperatures climb.
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