THE WASHINGTON POST: Middle East’s data centre push endures under the cloud of war

The Persian Gulf’s richest states are pushing forward with plans for a massive build-out of artificial intelligence infrastructure, even though data centers have become repeated targets in the US war with Iran.

State-backed firms in the United Arab Emirates have continued work on a sprawling artificial intelligence campus in Abu Dhabi meant to add five gigawatts of computing, after adding measures to protect workers at the peak of the war, people familiar with the matter said.

In Saudi Arabia, Public Investment Fund-backed Humain plans to raise an initial $2.5 billion from global and domestic investors for data centers in the kingdom, people familiar with the matter said this week. It’s moving ahead with plans to construct more than six gigawatts of computing capacity in the country and says its roll-out is on track despite the war.

These flagship projects are central to the economic agenda of the region, which is looking for growth opportunities beyond oil and gas. Both countries have invested heavily in technology and pitched their respective nations as reliable sources of abundant land and energy, which AI developers crave.

But such projects also rely on international partners, including OpenAI, Microsoft Corp. and Nvidia Corp., who will need to confront increased risk and expense to do business in the region as the war drags on. In July, satellite images showed damage to two Amazon.com Inc. data centers in Bahrain, following Iran’s claims that it had struck the sites with missiles.

At the time, a spokesperson for the Islamic Revolutionary Guard Corps told state-backed news agency Tasnim that the strikes had targeted “a major information-processing asset of the enemy.” The attacks followed drone damage to three AWS sites in the United Arab Emirates and Bahrain in March, and the company has said service in the region is degraded.

Major US partners for projects in the UAE and Saudi Arabia have made few public remarks since the war broke out, though in recent days Amazon announced it will make up to 50 megawatts of capacity available in Saudi Arabia’s first AI Zone by 2028 as part of an expanded collaboration. And Microsoft confirmed its Saudi Arabia East data center region will be available to customers in November 2026.

Meanwhile, in a boost to the ambitions of the UAE, the Trump administration this year eased export restrictions on the Gulf state, clearing the way for certain companies - including the G42 conglomerate which is the key driver of the Abu Dhabi campus - to buy advanced AI chips without seeking Washington’s permission each time.

Khazna, the G42-backed data center developer tasked with delivering the infrastructure for the Abu Dhabi campus, said it remains on track to deliver the first 200 megawatts of the project in the fourth quarter. “We have not seen any slowdown in customer demand or confidence as a result of the recent regional events,” it said in a statement.

Still, Iran and the US have engaged in a new round of military strikes in recent days, highlighting the lingering risks. Gulf governments are committed to building data center but Western tech firms could be more cautious, said Winston Ma, a professor at New York University and an AI investor.

“Most likely, the hyperscalers are going to hedge their global map of data center connectivity,” Ma said. “Gulf funds can build the data centers and supply the power, but without long-term commitments from Western hyperscalers and clear US regulatory alignment, those mega-projects risk becoming high-tech real estate with empty servers.”

Representatives for the UAE and Saudi government didn’t respond to requests for comment. Microsoft declined to comment. Amazon declined to comment beyond the company’s updates to its service health page, which advises customers to avoid portions of its network disrupted by the attacks.

Some threats from drones and missiles could be mitigated by “hardening” the sites. Adding security features to data centers, such as perimeter walls or protection for servers could increase the cost by about 5 to 7%, according to according to estimates from Integrated Security Systems.

“There is now a higher perception of physical risk as data centers are no longer just viewed as IT assets, they are regarded increasingly as critical infrastructure that could be targeted during a threat,” said ISS Chief Executive Officer Jane Mason, whose firm has offerings like ballistic and blast-proof panels.

Last year, OpenAI announced that a gigawatt of the Abu Dhabi campus would host Stargate UAE, the first international outpost of the San Francisco-based company’s flagship infrastructure joint venture. Since then, however, OpenAI has pulled back from other international Stargate sites and dropped the branding from newer projects.

An OpenAI spokesperson said that the company is “continuing to make good progress on the infrastructure and adoption priorities” in the UAE, declining to comment further. The UAE-US AI Campus is said to have stopped using the Stargate term for the first phase of its project.

To be sure, oil-rich Middle Eastern entities have become crucial sources of funding for the capital-intensive sector, making it harder for global firms and data center developers to break ties. In July, Abu Dhabi’s MGX raised $49 billion for one of the biggest ever funds dedicated to artificial intelligence deals, while state-backed entities across the region are significant backers of firms including OpenAI, Anthropic, and SpaceX.

One large private equity group also said it expects demand for data centers in the Gulf to keep growing and is hunting for assets to snap up now and sell on later at higher prices.

Jacopo Pichelli, managing director at FTI Capital Advisors, who advises regional data center operators, said local investors are undeterred by the new circumstances.

But international investors are more split, he said, with some “going ahead almost as intensely as before and others are leaning more towards a wait-and-see approach.”

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--With assistance from Alex Dooler, Mackenzie Hawkins, Paula Doenecke and Yassmin Jabri.

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