Placing them underwater means you get free, unlimited cooling.

Exactly the opposite of space, where all cooling must happen through radiation, which is expensive/inefficient

It's not free cooling underwater, you still have to circulate the water and seal the components.

Makes far more sense to build on the beach than underwater, if all you want is unlimited sea water to pump around.

I understood that part of Microsoft's experiment was to see how being hermetically sealed would affect hardware durability. Submerging is a good way to demonstrate the seal, but that part might have been just showmanship.