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I would be really surprised if anyone is cooling data centres with city water except in emergency, that's so unbelievably expensive (could see water direct from a lake though but that had it's own issues too). I recall saving millions just by adjusting a fill target on an evaporative cooling tower so it wouldn't overfill (levels were really cyclic, targets weren't tuned for them), and that was only a fraction of what it'd have cost if we'd've used pure city.
This is correct. You don't need potable water for cooling systems. Releasing vapor returns natural water where it came from, without adding any more heat to the environment than you already were.
The environmental cost of AI needs to be measured in gigawatt hours, distributed over different energy generation methods.
Adding heat to the system isn't a big deal if you're powered by solar energy, for example.
My work drilled water wells for evaporative cooling in their datacenter.