America’s Tech Future Is Not a Game—But We Played One to See What’s at Stake.
In today’s edition of our newsletter, SCSP’s David Lin and Nyah Stewart unpack insights from our recent collaboration with Lux Capital, where we teamed up to run one of their immersive Riskgaming scenarios. The exercise forced participants to navigate the tradeoffs between advancing America’s national tech ambitions and managing the local realities of finite resources like water and energy.
The Hidden Resource Behind America’s Tech Future
When we think about America’s technological competitiveness, we tend to focus on federal funding, private capital, and breakthrough innovations. Yet there’s an even more critical and fundamental resource that doesn’t always make headlines —and it’s not energy: it’s water.
Just as electricity powers our digital infrastructure, water is becoming equally central to AI progress and tech development and, by extension, to America’s geopolitical strength. The semiconductor industry, now racing to meet the rising computational demands of advanced AI models, faces a stark truth: like other AI-infrastructure, such as data centers, semiconductor facilities are extremely resource-intensive.
Semiconductor manufacturing requires ultrapure water—thousands of times cleaner than drinking water—to rinse away every trace of residue, pollutant, or mineral from silicon wafers that could damage delicate chip structures or impair performance. Producing 1,000 gallons of this kind of water takes 1,400 to 1,500 gallons of municipal water, purified through intensive deionization and reverse osmosis. Additionally, a single semiconductor manufacturing facility can consume up to 10 million gallons of ultrapure water per day, roughly equivalent to the daily water usage of 33,000 households.
The world’s largest chip manufacturer, TSMC, in a nod to this challenge, broke ground in August on a reclamation plant that will recycle water used at its manufacturing complex in Phoenix, Arizona, to reduce local strain. TSMC knows the challenges of water scarcity in chip manufacturing firsthand: in 2023, droughts in Taiwan had a deep impact on the company’s manufacturing operations and stirred fierce debate on the island between local farmers and the company over water resources.
An Investment Boom’s Resource Implications
Since the CHIPS Act allocated approximately $53 billion to bolster domestic semiconductor production, investment in the semiconductor supply chain has exploded. Starting in 2020, companies across the semiconductor ecosystem have announced over 130 projects spanning 28 states, totaling more than $600 billion in private investments.
And this momentum continues to build. In April, NVIDIA announced a $500 billion plan to manufacture its Blackwell chips in Arizona and additional computing infrastructure in Texas over the next four years. In June, Micron Technology, Inc. announced its $200 billion investment into semiconductor manufacturing and R&D in Idaho, New York, and Virginia. By September, NVIDIA and Intel marked a collaboration to build CPUs and GPUs. The Administration’s “One Big Beautiful Bill Act” has further accelerated this growth, raising the investment tax credit for U.S.-based fab construction from 25% to 35% for projects breaking ground before December of next year.
Together, these investments are projected to triple chipmaking capacity in the United States by 2032. As a result, water use is likely to increase dramatically.
National Ambitions, Local Execution
While the federal government makes top-down decisions to drive national strategy, execution depends on local realities.
Next-generation semiconductor fabs demand massive quantities of reliable power, complex logistics networks, and ultra-pure water. Their commercial success in the U.S.—and by extension, America’s high-tech competitiveness—depends not only on federal incentives or corporate investment, but on the pipes and aquifers managed by counties, cities, and tribal governments.
To gain water access, semiconductor fabs in the U.S. have to navigate an expansive network of more than 148,000 independent water systems and complex water rights that vary from state to state. Additionally, water is a somewhat finite resource, meaning that water allocation involves a series of tradeoffs. A gallon of water directed towards chip manufacturing could come at the expense of other needs, such as those of local farms and agricultural producers. Balancing these competing priorities is sometimes where national ambition meets local constraint.
Simulating Reality: The Riskgaming Exercise
To explore how these tradeoffs occur in practice, we partnered with Lux Capital, a deep-tech Silicon Valley and New York-based venture capital firm, to run one of its Riskgaming scenarios—immersive simulations designed to model real-world challenges and trade-offs in complex decision-making environments.
In Southwest Silicon: Water, Semiconductors, and the Future of American Economic Security, we invited representatives from companies, industry associations, think-tanks, and academia to step into roles ranging from local mayors and senators to foundry executives and community leaders. Set in Phoenix, Arizona, the game required each player to bargain and compromise with each other while pursuing individual goals and unique “victory conditions.”
In this exercise, water became the ultimate currency. Every decision carried weight, and every trade-off rippled across the Arizona stakeholder ecosystem. Participants were challenged to balance competing interests while forging trust, finding common ground, and ultimately signing water deeds to achieve their strategic objectives.
The Foundry Vice President wielded political influence and the power of site selection to secure incentives, water rights, and other concessions from local leaders, all while tracking stock prices and public sentiment. Their key decision: choosing which city would host the fabrication facility and determining whether it would produce cutting-edge processors (demanding higher water consumption) or legacy chips.
Meanwhile, city mayors faced the classic dilemma of short-term politics versus long-term prosperity, balancing re-election pressures with the lure of economic growth promised by semiconductor investment. A U.S. Senator weighed how to vote on a fictional successor to the CHIPS Act, mindful of national competitiveness and constituent priorities. At the state level, the President of the Arizona Senate grappled with whether to advance new tax measures to protect family farms, even as industrial expansion threatened to erode their already limited water access.
Success in this exercise required more than achieving individual goals; it demanded navigating the intricate web of interdependencies among all stakeholders. Every gain came at a cost. Each player’s triumph reshaped the window of opportunity, proving that in Arizona’s high-stakes semiconductor future, collaboration was as valuable as water itself.
Takeaways from the Table
The exercise offered several insights into how America’s national ambitions are implemented on the ground:
Tradeoffs aren’t failures, but the price of progress. Every major technology investment comes with competing demands for scarce resources, like water, energy, land, and even capital. The game underscored not just that tradeoffs exist, but how quickly and fairly we can negotiate them. As America sets its sights on an era of reindustrialization, these state and local-level negotiations will be the true front lines of building the next-generation of technology infrastructure – from fabs to data centers to fusion machines and beyond.
National ambition relies on local execution. Federal incentives and White House strategies set direction, but implementation happens through county boards, city councils, utilities, and tribal authorities. Zoning decisions, water permits, local politics, and power contracts – as tactical and as technical as they sound – will determine whether national goals turn into real-world capacity.
Incentives shape alignment. The future of America’s tech infrastructure is decided by a consortium of actors with different motivations. Not one single stakeholder has all of the information. Policymakers, corporations, and communities each bring their own “victory conditions” to the table, and achieving American technological leadership depends on aligning them. America must design policies that reward collaboration, shorten feedback loops, and link local economic gain to national strategic outcomes.
Collective strength is national strength. Achieving America’s most ambitious technological goals will require a whole-of-nation effort, one that bridges federal priorities, corporate incentives, and community needs. National security may not always be top of mind in local negotiations, but it is the thread that connects them all. The ability to work through tradeoffs collectively is what will ultimately secure America’s leadership in AI and other critical technologies.
The Bottom Line
As America invests hundreds of billions to secure its position in AI, it becomes increasingly clear that the success of our national tech strategy depends on solving thousands of local resource allocation puzzles, each one shaped by competing priorities, local realities, and shared ambitions.
The question isn’t just whether we can build the fabs. It’s whether we can align the people, policies, and places quickly enough to turn national ambition into operational reality, one negotiation, one water right, one community partnership at a time.
In the real world process, complex adaptive coalitions of interested parties from different organizations will form and reform on the playing field established by all levels of government, with their own government coalitions, rules, and incentives. This is the stage onto which coalitions with resources enter to seek their best deals through negotiation. Like other gaming simulations the outcomes we seek as a society are positive sum. The rules and incentives established by government will either promote the likelihood of those positive sum outcomes for all or fall short.