GoKawiilThe Middle East has long been keen on becoming a data center hub: as early as 2017, the United Arab Emirates (UAE) launched an AI strategy that was designed to place it as a global leader in the space by the start of the next decade. It quickly showed how it wanted to do that by setting up G42 a year later to corral its cloud computing capabilities.
Qatar followed with its own national AI strategy in 2019, and Saudi Arabia did the same in 2020. All have thrown significant investment into their projects, which has in turn attracted global investment, which is also eager to take advantage of the region’s cheap energy costs and significant sovereign wealth.
Saudi Arabia and the UAE are seen as the third and fourth most attractive places to develop data centers, according to Adrian Cox, managing director and thematic strategist at Deutsche Bank Research, in an April note. They sit only behind Virginia and Texas.
Latest Videos From
The largest projects are becoming pieces of national infrastructure, requiring vast amounts of electricity, cooling capacity, fiber connectivity, and political certainty. That’s why the Gulf looked so attractive to many. In parts of Europe and the United States, data center developers are running into grid constraints, permitting delays, local opposition, and power bottlenecks. In the Gulf, by contrast, governments can work on energy policy, land allocation, planning permission, and sovereign capital with a single national strategy.
All that combined makes the region unusually well-suited to the industrial scale of AI buildout. Training and running frontier models requires dense clusters of specialized chips, which in turn require dependable power and cooling. For hyperscalers, the appeal is obvious: build where the state wants you, where capital is available, and where energy supply is less constrained than in many traditional data center hubs.
“The Middle East was a prime candidate for the expansion of data centers before the conflict given readily available supply of power, available capital for development, domestic regulatory push, and strong political ties to the US,” said Mayank Maheshwari, an equity analyst at Morgan Stanley. Big money projects were announced for the region, including the Stargate project for the Middle East, among others.
From boom to bust?
(Image credit: Getty Images / Bloomberg)
But that belief has been shaken by the disruption within the region after Israel and the United States launched their first attempt to decapitate the Iranian regime.
... continue reading