The AI water issue is fake. Andy Masley (previously):

All U.S. data centers (which mostly support the internet, not AI) used 200--250 million gallons of freshwater daily in 2023. The U.S. consumes approximately 132 billion gallons of freshwater daily. The U.S. circulates a lot more water day to day, but to be extra conservative I'll stick to this measure of its consumptive use, see here for a breakdown of how the U.S. uses water. So data centers in the U.S. consumed approximately 0.2% of the nation's freshwater in 2023. [...]

The average American’s consumptive lifestyle freshwater footprint is 422 gallons per day. This means that in 2023, AI data centers used as much water as the lifestyles of 25,000 Americans, 0.007% of the population. By 2030, they might use as much as the lifestyles of 250,000 Americans, 0.07% of the population.

Andy also points out that manufacturing a t-shirt uses the same amount of water as 1,300,000 prompts.

See also this TikTok by MyLifeIsAnRPG, who points out that the beef industry and fashion and textiles industries use an order of magnitude more water (~90x upwards) than data centers used for AI.