Saudi Arabia eyes data embassies amid sovereign AI push

By Finance News On Dec 9, 2025

As countries race to build domestic data centers in the name of sovereign AI, Saudi Arabia is betting on a more creative idea: data embassies.

A data embassy is where data is stored outside of a country’s physical borders but operates under its laws, much like a diplomatic embassy.

The concept is not new. Estonia established the first data embassy in 2017 and there’s only been one other since, from Monaco. Both embassies are in Luxembourg and hold a backup of the countries’ critical data, set up as a security measure against cyber and climate risks.

As AI scales, the concept could gain momentum as a way to build data centers overseas — in places that have plenty of resources and power, given energy is one of Europe’s biggest bottlenecks in building AI infrastructure — while still operating within the laws of the developer’s country.

At least, that’s what Saudi Arabia is counting on as it positions itself as an exporter of data rather than oil. Saudi Arabia is betting hard on solar energy, but its water resources — needed to cool data centers — are scarce, dousing the idea in doubt. It comes as the country battles its neighbors to become an AI hub as global investors and tech firms turn to the Middle East for its deep pockets and influx of talent, representing a potential shift in global power.

Data embassy dealmaking

Getting data embassies up and running would be tricky in practice as they require bilateral international agreements on jurisdiction and there is currently no relevant legal framework in place, Viktor Mayer-Schönberger, professor of Internet governance and regulation at the University of Oxford, told CNBC.

The guest country and host state would have to agree on assurances that neither party is violating the terms of the agreement, Mayer-Schönberger, said. However, this will ultimately “depend on the trust of the parties involved,” he added.

Saudi Arabia, however, has set its sights on becoming the first G20 country to introduce such a framework. In April, its Global AI Hub Law draft set out three levels of data embassies, ranging from the guest country retaining full autonomy to hybrid legal protections where Saudi courts could assist foreign courts.

It is another example of how the AI race could reshape geopolitics as the Kingdom cozies up to the U.S. There has been no indication of the U.S. being a preferred partner for data embassies, but the pair has established a “Strategic Artificial Intelligence Partnership” with Saudi Arabia that includes the “building and developing advanced AI infrastructure.”

When asked whether the concept could solve tensions around ByteDance’s TikTok, where the U.S. feared its citizens’ data was being accessed by the Chinese government and used to influence voters ahead of the 2024 election, Mayer-Schönberger was not convinced.

“It would require a complex bilateral treaty between China…