Iran War Imperils $300 Billion in Gulf AI Spending
UAE and Saudi Arabia have been big investors in AI and major destinations for data centers.
The war in Iran is complicating plans by Gulf nations to spend more than $300 billion on data centers, chips and other AI investments, crimping a potential source of funding for power-hungry tech companies.
Countries such as the UAE and Saudi Arabia have become big destinations for data centers. Local firms are developing the projects, along with U.S. companies such as xAI, OpenAI, Microsoft, Amazon, Oracle and Google, which are drawn to the region for its cheap energy.
The Takeaway
Iran war threatens over $300 billion in Gulf AI investments.
Gulf nations’ massive AI data center plans face disruption.
Drone strikes on Amazon data centers highlight regional risks.
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Drone strikes on three Amazon data centers in the region suddenly made those projects appear riskier. A prolonged war could also reduce overseas investment into the region from firms such as Brookfield, which is working with multiple Gulf nations on their AI investments.
OpenAI and xAI have raised money from Gulf nations and made plans to build data centers in the region, leaving them more exposed to the risks of the conflict than rival Anthropic, which has raised money in the Gulf but has been reluctant to build large-scale computing facilities there.
Gulf nations will be won’t rush to divert resources away from AI investments because of their economic and strategic importance, said analysts who cover the region. But they might have little choice if the conflict stretches on for a long time.
“If that turns into months, or even longer, there could certainly be a disruptive pause to some of that investment,” said Stephen Minton, an analyst at technology research firm IDC. Minton said he expects the Gulf’s spending to continue in the near term.
After the tech giants themselves, Gulf countries have been among the biggest funders of AI. Spending plans by Kuwait, Qatar, Saudi Arabia and the United Arab Emirates cover everything from land and power for data centers to efforts to build powerful AI models in local dialects. The priciest items are Nvidia GPUs, which the countries have fought hard to import due to national security concerns on the part of the U.S. government.
Saudi Crown Prince Mohammed bin Salman recently said the country planned to spend $50 billion on semiconductors in the short term, and the UAE could spend upward of $30 billion purchasing its allotment of Nvidia chips through next year, according to current market prices. Those chips won’t be usable if regional leaders can’t find a way to continue funding and protecting their data centers.
Hits on the three Amazon data centers in the Gulf disrupted several Amazon Web Services offerings in the region, according to the company’s most recent service update Tuesday.
The UAE, where two of the facilities were hit, is aiming to build the biggest project in the region: a data center campus spanning 10 square miles and consuming as much as 5 gigawatts of energy. OpenAI and Oracle will operate 1 GW of chip capacity at the site as part of the Stargate project.
Saudi Arabian officials have said they plan to build data centers consuming 6.6 GW of energy by 2034. Elon Musk’s xAI is working with Humain, the company overseeing the plans, to develop a data center in the country that could consume 500 megawatts of energy. (Before the AI boom, data centers used to be between 10 and 50 MW. A 1GW data center costs between $50 billion and $60 billion to build.)
Amazon, Google, Microsoft and Oracle have also either begun building data centers or announced plans to do so in Saudi Arabia. Iran has fired missiles at Saudi Arabia, including at the U.S. Embassy there.
Humain CEO Tareq Amin said in a statement Thursday that the company had secured 211 plots of land across Saudi Arabia for its data center plans. He emphasized its efforts to avoid service outages. “Our strategy is built on geographic diversity and multiple fiber-optic routes, which is possible because of the Kingdom’s vast land mass,” he said.
Kuwait and Qatar haven’t outlined nearly the level of spending commitments of their Gulf neighbors, but they’re investing alongside asset managers BlackRock and Brookfield in their pushes to build AI data centers. Brookfield and Qatar’s sovereign wealth fund said in December they planned to invest $20 billion together in AI projects both domestically and abroad.
The war could cause countries to rethink where they build data centers, said Jesse Marks, CEO of Rihla Research and Advisory, a geopolitical consulting firm. “The Gulf will reach a moment where they have to reassess how they build core infrastructure, even down to the geographic location,” he said.
Brookfield Asset Management CEO Connor Teskey said last week the war hadn’t affected the firm’s investment plans in Qatar. “We’re very long-term investors,” Teskey said during a Bloomberg TV appearance.
Even if Gulf nations continue to spend on domestic AI projects, they could pull back from their pledges to spend trillions of dollars in the U.S. on manufacturing facilities and other large investments. Saudi Arabia’s sovereign wealth fund is funding most of the $55 billion buyout of Electronic Arts, which it’s trying to finalize in the next few months.
The macro impact of the war could also have broader effects on AI financing. A prolonged conflict could hit travel, trade and investment, slowing the global economy. Higher energy prices—oil is up by almost a third—could spur inflation and push up interest rates, driving up the cost of the data center buildout. U.S. interest rates last week rose the most they have since President Donald Trump imposed his “liberation day” tariffs in April.