Because it is cheap and government pay for infrastructure and maintenance. If these company would have to pay for the public goods they use none would be profitable.

Better solutions have always and will always exist, but they cost more to implement.

Piping grey water to a data center either means placing it somewhere with an appropriate pipe with appropriate filtration performed, or building a new pipe/filtration. Drinking water in comparison is easily accessible anywhere. They don’t care about the impact or even the per unit cost, they just want to build on the cheap and take advantage of local infrastructure, and they figure in this ai boom the actual running costs are irrelevant because ai companies will pay for anything that works, efficiency be damned