Super El Niño Could Challenge AI's Water and Power Access
Man Group PLC analysis warns that the predicted 'Super El Niño' may intensify competition for water and power between AI data centers and agriculture, impacting global markets.
An analysis by Man Group PLC suggests the 'Super El Niño' weather phenomenon expected in 2026 could create significant market disruptions by intensifying competition for critical resources like water and power, primarily affecting data centers supporting artificial intelligence and the agricultural sector.
El Niño, a natural climate pattern that elevates sea surface temperatures, is linked to extreme weather events globally. The National Oceanic and Atmospheric Administration (NOAA) confirmed its arrival in June, with forecasts indicating it could become one of the strongest on record and potentially extend its impacts into 2027.
Man Group's research posits that markets have largely underestimated this climate volatility as a systematic risk. The phenomenon is expected to strain already tight energy and liquefied natural gas (LNG) markets, alongside a global food chain with minimal slack, potentially leading to compounded shocks in heat, power, water, and crop availability.
The agricultural sector is identified as particularly vulnerable, with projected yield reductions and higher food prices. The interconnectedness of global supply chains, including fertilizer reliant on diverse energy sources, adds to this risk. Simultaneously, the increasing demand for electricity and water from AI data centers places additional pressure on power grids already challenged by aging infrastructure and growing electrification, potentially leading to resource conflicts.