Arizona Welcomed a Thirsty Chip Plant, but New AI Data Centers Are Meeting Organized Resistance Over Water

What happened

A feature by The Verge looks at why Arizona embraced a giant microchip factory but is now pushing back against large data centers tied to the AI boom. According to The Verge, Taiwan Semiconductor Manufacturing Company's complex in north Phoenix uses nearly 5 million gallons of water a day, drawn from the city's municipal supply. The company has faced no significant opposition.

Newer hyperscale data center proposals from Phoenix to Tucson are a different story. The Verge reported that a grassroots coalition of residents, which it described as surprisingly bipartisan, has formed against them. Arizona already has 172 data centers, the outlet reported, and earlier projects drew little attention.

Why TSMC got a different reception

A pitch years in the making

Christine Mackay, head of Phoenix's economic development office, led the effort to bring TSMC to the city, The Verge reported. The company began looking for a U.S. location in 2016, and Phoenix sent a delegation to Taiwan in 2019. TSMC announced its Phoenix foundry in 2020.

TSMC first projected it would put $12 billion into Arizona's economy by 2029. That figure has grown to $265 billion, which the company calls the largest foreign direct investment in U.S. history. The Verge reported that TSMC has brought more than 3,500 jobs to the state, recently finished its second fab, and has a third under construction.

Water use compared

Data center developers say their facilities need less water than people expect. The Verge noted that Google's data center in The Dalles, Oregon, uses about 1.5 million gallons a day, about one-third of TSMC's Arizona use. Those assurances have not satisfied many Arizonans, the outlet reported, as the state faces losing access to nearly 30 percent of the water it gets from the Colorado River.

Mackay told The Verge that past projects drew little pushback. "The first 10 data centers I did look like pretty little office buildings," she said. The new proposals are much larger and are often planned for rural farm or desert land.

Project Blue in Tucson

The promises

Beale Infrastructure is building a 600-megawatt data center called Project Blue on a 290-acre site on the outskirts of Tucson, The Verge reported. Early details said it would create 3,000 temporary construction jobs and 200 permanent positions and generate $152 million in tax revenue over a decade. Pima County, which owned the land, had signed a nondisclosure agreement with the developer.

In June 2025, County Administrator Jan Lesher sent supervisors a 44-page memo describing a $3.6 billion opportunity. It said Project Blue would use 100% renewable water resources and that Beale would pay for an 18-mile pipe extension and an aquifer recharge facility.

The votes and the backlash

Supervisors voted 3-2 to rezone the land and then voted to sell it to Beale for around $20 million. The deal required Tucson to annex the land and approve the sale, since the city would provide water service. Hours after the vote, Tucson Electric Power said it was looking into a rate increase averaging 14 percent, which the utility said was unrelated.

The Verge cited an Arizona Mirror report that Project Blue and another proposed data center would become the utility's biggest customer and use more than four golf courses' worth of water a year. Amazon Web Services was reportedly the end client. Arizona Luminaria obtained records showing county officials signed agreements barring them from naming the companies involved. One supervisor who voted for the rezoning later asked to reconsider it.

Residents organize

On August 1, about a dozen people with the No Desert Data Center Coalition rallied in front of the Project Blue site, The Verge reported. Organizer Vivek Bharathan claimed data centers create heat islands that can raise nearby temperatures by more than 10 degrees Fahrenheit. The outlet reported that the buildings are going up anyway. More coverage is in our AI and tech section and our water coverage.

What to watch next

• Construction of Project Blue near Tucson, which The Verge reported is moving ahead despite opposition.
• The request by a Pima County supervisor to reconsider the Project Blue rezoning.
• Tucson Electric Power's possible rate increase averaging 14 percent.
• TSMC's third Phoenix fab, now under construction, and its plans for several more.