The real reason it's not the best argument is the exaggerated relative scale of those issues and plausible fixes. Water use in particular is orders of magnitude lower than other industry, only a serious issue if building it in a really bad location. The electricity use is enough to raise prices for people nearby which could be a good reason to oppose local government allowing them to be built, but they can get around that by expanding grid capacity themselves to make up for it, and even better if they did it with renewables.

It's a good argument for holding datacenter builders accountable for doing it responsibly, but a flawed one for unconditionally opposing AI.