The Middle East war is testing the Gulf’s ambitions to become AI hub

The Gulf’s ambition to become a global hub for artificial intelligence is being tested, as the potential for a prolonged conflict in the Middle East raises questions over energy security, infrastructure resilience and investor confidence.

Before the war began in February, the United Arab Emirates, Saudi Arabia and Qatar were racing to position themselves at the center of the AI boom, leveraging abundant, low-cost energy and strategic geography to encourage hyperscalers to build out vast data center networks there.

But two Amazon data centers in the UAE were targeted early in the war and, nearly three months later, oil prices remain around $100 a barrel and the Strait of Hormuz remains closed.

While investors and companies involved in AI infrastructure in the Middle East told CNBC they were bullish about the region’s future in the sector, rising geopolitical risk in the region could impact AI projects, analysts said. Investment decisions into some data center projects in the region have been paused or are taking longer as the conflict continues.

“The ongoing conflict in the Middle East is putting AI infrastructure on the literal front lines in ways that even a year ago, two years ago, would have seemed out of the realm of possibility,” Trisha Ray, associate director and resident fellow at the Atlantic Council’s Geotech Center, told CNBC’s Dan Murphy on May 15.

The war has “marked a shift,” she added. Risk management used to focus “on cyber threats, digital disruptions, not kinetic threats. And this has changed with the drone strikes,” said Ray.

The AI bet

In the years before the war, Gulf nations made advanced technology a core pillar of their plans for economic diversification, from sovereign-backed investment vehicles to national AI strategies. At the core of this pitch is energy. The Gulf’s access to abundant hydrocarbons, large-scale generation capacity and relatively low-cost electricity made it an attractive destination for power-intensive data centers that form the backbone of AI and cloud computing.

The UAE backed major initiatives through its AI investment platform MGX and local AI “champion” G42, both founded by the $385 billion Abu Dhabi investor Mubadala. Saudi Arabia plans to deploy tens of billions of dollars into AI and data infrastructure as part of Vision 2030 through HUMAIN, backed by the Kingdom’s nearly $1 trillion Public Investment Fund. Qatar is also investing heavily in AI and established a national firm called Qai, a subsidiary alongside the nearly $600 billion Qatar Investment Authority, in partnership with Brookfield.

Against this…