Escalating tensions surrounding Iran are complicating data center, semiconductor, and other artificial intelligence investment plans exceeding $300 billion in Gulf nations. This situation may further constrict potential funding sources for technology companies with high demands for computing power. The United Arab Emirates and Saudi Arabia have emerged as favored locations for data center development. Local enterprises are collaborating with US firms such as xAI, OpenAI, Microsoft, Amazon.com, Oracle, and Google on related projects, with the region's cheap energy advantages making it a strategic focus for these companies. However, a recent drone attack targeting three Amazon Web Services data centers in the region has suddenly elevated the risk profile of these ventures. Should conflicts persist long-term, this could further reduce foreign investment in the area from firms like Brookfield—companies that are currently partnering with multiple Gulf states to advance artificial intelligence investments. Both OpenAI and xAI have secured financing from Gulf nations and plan to construct data centers locally. Compared to competitor Anthropic, which has also obtained Gulf funding but avoids building large-scale computing facilities, these two companies face higher risks in the current conflict. Analysts covering the region indicate that due to economic and strategic importance, Gulf countries are unlikely to immediately reduce AI investments because of this conflict. However, if hostilities continue for an extended period, they may have no alternative. "If the conflict persists for months or longer, some investments could indeed be forced to halt," stated Stephen Minton, an analyst at technology research firm IDC. He nevertheless anticipates that AI expenditure in the Gulf will continue growing in the short term. Beyond the tech giants themselves, Gulf states rank among the largest investors in the artificial intelligence sector. Spending plans in Kuwait, Qatar, Saudi Arabia, and the UAE encompass various areas including data center land and power, development of AI models for local languages, and—most expensively—Nvidia GPUs. Affected by US government national security considerations, these countries are making concerted efforts to import these chips. Based on current market conditions, Saudi Crown Prince Mohammed bin Salman recently indicated the kingdom plans to invest $50 billion in the semiconductor sector in the near term. The UAE may spend over $30 billion before next year to procure its quota of Nvidia chips. If local conditions cannot consistently provide funding and security for data centers, these chips will struggle to be utilized effectively. Amazon.com's latest service update on Tuesday revealed that multiple Amazon Web Services in the region have been affected following attacks on three of its data centers. The UAE, where two of the targeted facilities are located, is committed to developing the region's largest project: a 10-square-mile data center campus with a power capacity of up to 5 gigawatts. As part of the "Stargate" initiative, OpenAI and Oracle will operate 1 gigawatt of chip capacity within this campus. Saudi officials plan to construct data centers with a total power capacity of 6.6 gigawatts by 2034. Elon Musk's xAI is collaborating with Humain, the entity responsible for relevant planning, to build a data center locally with a capacity of up to 500 megawatts. Prior to the AI boom, data center power consumption typically ranged from 10 to 50 megawatts; constructing a 1 gigawatt data center costs approximately $50 to $60 billion. Amazon.com, Google, Microsoft, and Oracle have also initiated or announced data center construction projects in Saudi Arabia. Iran has previously launched missiles toward Saudi territory. In a statement on Thursday, Tariq Amin, CEO of Humain, confirmed the company has secured 211 land plots for its Saudi data center plans and emphasized efforts to prevent service disruptions. "Our strategy is based on geographical diversity and multiple fiber routes, an objective made feasible by the Kingdom's vast land area," he said. While Kuwait and Qatar have not announced large-scale spending commitments on par with their neighbors, they are cooperating with asset managers like BlackRock and Brookfield to advance AI data center development. Brookfield and Qatar's sovereign wealth fund stated last December their intention to jointly invest $20 billion in domestic and international AI projects. Jesse Marks, CEO of geopolitical advisory firm Rihla Research and Advisory, suggested the conflict might prompt nations to reconsider data center location planning. "The Gulf region will eventually face a moment of reassessing how core infrastructure is built, including its geographical placement," he noted. Connor Teskey, CEO of Brookfield Asset Management, stated last week that the conflict has not impacted the firm's investment plans in Qatar. "We are long-term investors," he affirmed. Even if Gulf nations continue investing in local AI projects, they might scale back trillion-dollar commitments to US manufacturing facilities and other major investments. Saudi Arabia's sovereign wealth fund is providing the majority of funding for a proposed $55 billion acquisition of Electronic Arts, a deal expected to be finalized in the coming months. The macroeconomic impact of the conflict could also affect AI financing broadly. A prolonged conflict would negatively impact tourism, trade, and investment, potentially slowing global economic growth. Rising energy prices—with oil up nearly 30%—could trigger inflation, push interest rates higher, and consequently increase data center construction costs. US interest rates saw their largest weekly increase last week since the implementation of the "Tax Freedom Day" tariffs by President Donald Trump in April 2019.
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