It will work to cool the water, but will be less efficient than cooling the chip directly. The problem is that watercooling the hot side of the peltier will get it much colder than aircooling it. Hence, the cold side will also be much colder. This means you can get a lot colder at the CPU if you use CPU -> Peltier -> Water than CPU -> Water -> Peltier.
However, such an arrangement will allow you to get sub-ambient water temps if you attach the Peltier after the radiator in the loop, and it is powerful enough. The other advantage is that if the Peltier dies for whatever reason, the computer doesn't.
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