El Niño is a "systemic shock" that could wreck semiconductor supply chains, the WEF warns
“Crises no longer arrive neatly or sequentially. They overlap, compound, and amplify one another.”
The World Economic Forum has warned that the emerging El Niño weather pattern could disrupt critical infrastructure, semiconductor production, and the wider AI economy globally.
El Niño is the warming phase of the El Niño-Southern Oscillation climate cycle that forms in the tropical Pacific Ocean. It is associated with drought, flooding, extreme heat, and disruptions to rainfall patterns across large parts of the world.
The WEF argues that governments and businesses are underestimating the risks posed by the climate phenomenon, which could intersect with other vulnerabilities to cause cascading shocks throughout the global economy.
“El Niño is often treated merely as a weather story, but in 2026, that risks complacency,” Robert Muggah, founder of the Brazilian think tank Igarapé Institute, wrote in a report for the WEF.
“El Niño is a foreseeable systemic shock and societies must prepare for it. While its exact strength may be uncertain, its pathways are known. In a world already marked by conflict, technological competition and fragile markets, waiting for impacts of El Niño to materialize would be a failure of governance. The warning is clear and we must act now.”
Chip shortages and water stress
The World Meteorological Organization has forecast an 80% probability of an El Niño event between June and August 2026, in line with similar forecasts from the US National Oceanic and Atmospheric Administration, which estimates the phenomenon has a high chance of emerging between May and July and persisting into 2027.
While the immediate effects are meteorological, the WEF argues that the real danger lies in the cascading impacts across interconnected systems.
“Climate shocks can disrupt power grids, water systems, semiconductor production, logistics corridors, and data center operations on which chip manufacturing and data centers rely, threatening the wider AI economy that is increasingly integral to global systems,” the report states.
The warning comes as governments and technology companies invest hundreds of billions of dollars into artificial intelligence infrastructure, creating unprecedented demand for advanced semiconductors and the facilities required to manufacture them.
Semiconductor fabrication is heavily dependent on reliable access to water and electricity. Even relatively short disruptions can have consequences throughout global supply chains.
The systemic dangers of drought
The industry’s vulnerability was exposed during Taiwan’s severe drought in 2021. The island is home to many of the world’s most important chip manufacturers, and the water shortage raised fears of significant disruptions to global semiconductor production.
A supply-chain assessment published through the U.S. Department of Homeland Security’s Analytic Exchange Program concluded that the drought “nearly crippled the global semiconductor supply chain”. During the crisis, Taiwan implemented water rationing measures and prioritized supplies for strategic industries, including semiconductor manufacturing.
Modern chip manufacturing depends on enormous quantities of water. An average semiconductor fabrication plant can consume around 10 million gallons of ultrapure water every day — roughly equivalent to the daily water use of 33,000 US households.
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This thirst is creating a growing global vulnerability.
A separate WEF analysis published last year found that 40% of existing semiconductor manufacturing facilities are located in watersheds projected to face severe water stress by 2030. More than a quarter of plants currently under construction, and 40% announced since 2021, are being built in similarly vulnerable regions expected to face water stress in the 2030s and 2040s.
The problem extends beyond water. Taiwan produces around 60% of the world’s chips and roughly 90% of the most advanced semiconductors, while demand for power continues to surge as AI infrastructure expands. One company alone — TSMC — consumes roughly 6% of Taiwan’s electricity.
This concentration creates a broader systemic risk to critical systems across the planet.
Weather shocks
The same island that sits at the center of global semiconductor production faces risks from drought, heatwaves, typhoons, earthquakes, energy shortages, and geopolitical tensions.
Which means even relatively brief disruptions can reverberate through global manufacturing networks. Taiwan’s 2024 earthquake, for example, forced temporary production halts and raised concerns about supply chain disruption across Asia.
Meanwhile, the AI boom is increasing dependence on exactly the infrastructure most exposed to climate stress.
Semiconductor production is expected to exceed $1 trillion by 2030, yet analysis from PwC suggests that by 2035, nearly one-third of global semiconductor output could depend on copper supplies vulnerable to climate disruption. By 2050, that figure could rise because reliable water supplies are critical for copper mining.
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We are likely to see climate play an increasingly central role in resilience planning. The artificial intelligence revolution depends on an increasingly fragile physical foundation of chip fabs, water reservoirs, power grids, cooling systems, logistics corridors, and mineral supply chains.
The WEF’s warning is an omen of what might happen when climate shocks collide with a global economy that has become critically dependent on a small number of highly concentrated and resource-intensive technologies.
As Muggah put it: “Crises no longer arrive neatly or sequentially. They overlap, compound, and amplify one another.”
For the semiconductor industry - and the AI economy built atop it - El Niño may mean much more than bad weather.
