The artificial intelligence boom is forcing a rethink of where computing infrastructure can physically go. Land is scarce, energy grids are strained, and fresh water for cooling is increasingly contested. The answer, for a growing number of developers, is the ocean.
Microsoft tested it first — then walked away
In 2018, Microsoft placed a waterproof data center on the seafloor near Scotland's Orkney Islands. The facility held 864 servers connected to shore by an underwater cable. After two years, the company reported that servers in the underwater unit failed at roughly one-eighth the rate of comparable land-based servers — a striking reliability figure the company attributed to reduced exposure to oxygen, humidity, temperature fluctuations, and physical jostling.
Despite those results, Microsoft ended the project in 2024 and did not build additional underwater facilities. The company offered no public explanation, though outside analyses pointed to regulatory hurdles — including the need for environmental permits — and a preference for faster equipment upgrades, which are far simpler in land-based buildings.
China moved to commercial scale
Where Microsoft retreated, China advanced. A US$226 million facility in Shanghai — described as potentially the world's first wind-powered underwater data center — launched in June 2025 and reached full commercial operations in May 2026. The project uses seawater as a coolant, eliminating the need to refrigerate fresh water, and draws power from offshore wind turbines. According to the source, it uses at least 30% less electricity than traditional data centers.
A global race for the frontier
The competitive map is widening fast:
- Japan opened a data center in shipping containers on a floating platform near Yokohama in 2025, powered entirely by solar panels on the same platform, with battery storage. The test runs through March 2027. - Singapore — land-constrained by geography — saw infrastructure company Keppel begin construction in 2026 on a four-story floating data center scheduled to open in 2028, using seawater cooling. - South Korea began planning in 2025 for an underwater facility in Ulsan capable of housing more than 100,000 servers, also projecting 30% lower power consumption through seawater cooling. - Maine has a proposal on the table: DeepGreen Western Passage has put forward a submersible AI data center in the Bay of Fundy, powered by tidal turbines harnessing the region's strong tidal currents. - Portugal's SIN01 data center in Sines already uses Atlantic seawater to cool land-based servers before returning it to the ocean.
The numbers are real; so are the risks
The efficiency case is straightforward. Seawater cooling slashes electricity demand. Offshore renewables reduce carbon exposure. Removing servers from land eases permitting battles in dense urban markets. For capital allocators watching hyperscaler energy bills climb, a 30% reduction in power consumption is not a rounding error — it is a margin story.
But the environmental ledger is not one-sided. Submerging industrial hardware in marine ecosystems raises legitimate questions about heat discharge, electromagnetic interference, and the long-term effect on ocean biology. Regulatory frameworks for seafloor or floating infrastructure barely exist in most jurisdictions, creating legal uncertainty that can freeze investment as quickly as it attracts it.
CEO Times take: Free enterprise is doing exactly what it should — routing capital toward the most efficient solution when land, water, and grid capacity become binding constraints. The 30% power savings documented in multiple projects represent real value, not a government mandate. The risk is that regulators, moving at their customary pace, impose permitting regimes so burdensome that American innovators cede this frontier to Beijing by default. The Bay of Fundy proposal and the Singapore build show the opportunity is genuinely global. Whether U.S. firms lead or follow will depend less on engineering and more on whether Washington can clear a path before the ocean fills up with Chinese servers.
