Gulf champions and Western firms are staying the course on AI infrastructure in the MIddle East, but more attacks could change their calculus

The enthusiasm for building AI infrastructure in the Gulf hasn’t noticeably dwindled more than seven months after Iranian drones damaged Amazon data centers there and amid ongoing attacks by Houthis in Saudi Arabia. That’s the good news for Saudi Arabia, the UAE and other Gulf nations as they aim to aggressively reorient their economies to take advantage of the global surge in demand for AI computing power.

But there’s a lurking danger that big Western hyperscalers might reconsider the Gulf’s long-term viability as a major computing hub — especially if Iran follows through on threats to aggressively target the infrastructure of Western firms that it considers complicit with the US and Israel.

Iranian officials have renewed those threats in recent weeks. Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned on X this week that the nation is creating a “Persian Gulf Data Authority” to punish nations that cooperate with AI firms it considers complicit in military actions against Iran. “To governments, funds, and firms in the region: you are kindly advised to give no resources to any AI or data company aiding invasions or killing children. No finance, equity, land and energy. Assist them and face our enforcement,” Ghalibaf wrote.

The Iranian Revolutionary Guard Corps published a list of 18 companies that were potential targets back in late March, including US tech giants and the UAE’s G42.

Even a minor shift in the enthusiasm of Western AI firms could have serious implications for the technology’s long-term economic prospects in the Gulf. “At the beginning of the year, I would have described the Middle East as one of the most robust data center markets, probably a couple of steps ahead of Europe in terms of growth momentum,” Tahir Gok (LinkedIn), an independent digital infrastructure consultant focused on the Middle East, tells EnterpriseAM. “Right now, considering the different geographical risks, we need to wait and see.”

Egypt, meanwhile, sees an opportunity to take market share from the Gulf, with Hassan Allam Digital Infrastructure and A15 at the leading edge after their summer announcement they had committed USD 400 mn in initial capital to go after the data center market. We went deep on Egypt’s ambitions earlier this week.

The top line: Iranian drones directly struck two Amazon Web Services data centers in the UAE and damaged another in Bahrain with a nearby strike in the early days of the war, causing structural damage, power outages and fires, according to the cloud provider’s service dashboard, dramatically jeopardizing the Gulf’s status as a safe haven for Western tech investment. A second AWS site in Bahrain was damaged in April.

Amazon has been unable to restore access to cloud services in Bahrain and parts of the UAE, the company acknowledged in a September update, adding that it is “working on replacing the affected [UAE] infrastructure and will provide an update on the restoration of our services in the coming months.” In Bahrain, AWS said it had exhausted every option for recovering data that customers hadn’t migrated before the region went offline, and that it would provide a further update in early 2027.

Staying the course: Construction on more than USD 100 bn in major AI building projects across the Gulf has generally continued since then with no broad work stoppages, Gok and other analysts say — despite intermittent bursts of fighting and despite a sharp increase in insurance costs.

There have been some delays caused by supply chain issues, Gok notes, many of them due to the large volumes of data center construction across the globe. Others are due to the closure of the Strait of Hormuz, The Register reports, citing BCS Consultancy.

Spreading out: The UAE is considering revising plans for the massive 5 GW UAE-US AI Campus that G42 is leading to make it more geographically spread out, Reuters reports.

The plan, which is not finalized, envisions building a network of data centers across the country rather than a single 26 sq km campus in Abu Dhabi, the wire service says. That broader footprint would make it more difficult for Iran or another adversary to significantly disrupt operations using drone or missile strikes. The plan is not expected to affect Stargate UAE, the campus’s USD 30 bn, 1 GW first phase that’s already under construction.

IN CONTEXT- The intermittent bursts of missile and drone strikes between the US, Israel and Iran during the past five months haven’t matched the intensity of fighting in March and April, though the lack of a peace deal or long-term ceasefire means there’s still a risk of returning to all-out conflict. The Iran-aligned Houthis, meanwhile, have dramatically increased attacks against Saudi Arabia, causing numerous casualties and, importantly for the tech world, forcing the postponement of the Kingdom’s annual Future Investment Initiative conference, known as Davos in the Desert.

Gulf AI champions want you to know it’s “BAU” — business as usual:

• The UAE’s under-construction Stargate AI campus will deliver its first 200 MW of computing power in Q4 2026, Khazna, G42’s data center division, told Bloomberg.
• Microsoft’s Saudi Arabia East data center region will be open for customers in November and Amazon plans to make up to 50 MW of capacity available in Saudi Arabia’s first AI zone by 2028, Bloomberg also reported.
• Saudi Arabia’s Leap conference, which closed on 3 September, saw more than USD 15 bn in launches and agreements on its opening day alone, including new partnerships and expansions involving Amazon, Microsoft and other Western tech giants.
• The UAE’s ambassador to Washington, Yousef Al Otaiba, pledged that work was getting done despite the challenges posed by the conflict in a Monday letter to the US-UAE Business Council. “Our commitments to the United States remain firm, our major investments are moving forward and expanded access to advanced technology is opening further opportunities,” he wrote.

Some Western partners are also projecting stability: Microsoft led the pack by announcing plans in September to invest more than USD 10 bn in Gulf technology between now and 2030, a figure that includes USD 2 bn in new commitments. The outlay is focused on cloud and AI infrastructure, among other priorities. Amazon Web Services CEO Matt Garman told Forbes in April that his company “continue[s] to be extremely bullish about our partnerships in the Middle East and about the long term potential of the region.” The Trump administration also gave a boost to the region in July when it announced new export rules granting G42, its cloud arm Core42, and US companies operating in the country access to advanced AI chips without export licenses.

Also important to note: The relationship between US tech giants and Gulf AI champions is unusually tight — including numerous USD multi-bn deals. That makes the relationship extremely difficult — though not impossible — to unwind during tough times. OpenAI and Oracle, for example, are set to operate Stargate UAE, which G42 is building with partners including Nvidia, Cisco and SoftBank in a roughly USD 30 bn transaction.

But companies have also generally been tight-lipped about their investment plans in Gulf infrastructure beyond existing commitments. US firms including Amazon, Google, Microsoft, Cisco, and Nvidia either declined to comment for this story or didn’t respond to a request for comment.

“I think a lot of companies are waiting to see what happens,” Sam Winter-Levy (LinkedIn), a senior fellow focused on AI and geopolitics at the Carnegie Endowment for International Peace, a US think tank, tells EnterpriseAM. “Data centers are soft targets. They’re big, sprawling industrial structures. They’re on Google Maps. It’s hard to protect them against drones.”

A balancing act: Whether foreign companies make additional investments in Gulf AI infrastructure will depend on balancing the risk of renewed fighting with the Gulf’s clear advantages as a computing provider, Gok says.

“I’ve heard from a number of international data center developers that their boards have become more cautious about committing to additional investment in the Middle East,” he notes. But investing in our part of the world is “still attractive, because these countries are offering modern facilities, competitive power economics, and access to advanced GPUs.”

Part of a bigger picture: In addition to worrying about physical attacks from Iran, foreign firms are waiting to see if Gulf AI data centers can attract a broad enough customer base to justify additional building, Gok says. He warned against viewing the Iran war as the only — or even the main — factor in the success or failure of the region’s AI ambitions.

There are a variety of security measures Gulf players can take to mitigate the risks of physical attacks, security analysts tell EnterpriseAM. At the cheaper end, these include installing jamming technology that disrupts drones’ flight paths and nets that drones would get tangled up in. The costlier end includes Iron Dome-like systems to shoot attacking drones out of the sky or even building data centers underground.

Humain and G42 have both announced plans to harden their infrastructure, though they have not provided specific details of new security protections.

THE CHALLENGE: The more money Gulf players spend protecting their data centers from physical attack, the less profitable those centers become. “There are many things you can do to harden a data center, but it’s expensive,” Winter-Levy says. “The economics of building [in the Gulf] look much more challenging, or at least more uncertain.” (Winter-Levy has been a critic of US companies building AI data centers in the Middle East since before the war, arguing that doing so makes the US too dependent on other nations for a critical component of its economic vitality and national security.)

Another strategy is to keep spare parts on hand, so data centers can quickly recover from minor damage. “I’d start with the principle that resilience matters more than trying to make any single facility invulnerable,” Joe Scheidler (LinkedIn), a former White House and US State Department official focused on infrastructure and investment, tells EnterpriseAM. “Companies should look at a layered physical security approach including site design, hardening, backup power and cooling, multiple connectivity routes and making sure they have rapid recovery capability,” says Scheidler, who is founder of the tech firm Helios.

One advantage cloud systems and networked data centers have over other types of facilities is that they can zip data from one facility to another, so damage to one portion of their infrastructure doesn’t necessarily mean long interruptions for customers. Mohammed Soliman (LinkedIn), a senior fellow at the Middle East Institute, argued in a Foreign Policy essay that the Gulf should take lessons from Ukraine, which transferred its sensitive data out of the country after Russia’s 2022 invasion, removing it as a Russian target. However, that would require dramatic policy changes for Gulf leaders who — like a growing number of politicians globally — have insisted on housing sensitive government and other national data inside their countries for sovereignty reasons, Soliman notes.

There’s always a danger that costly anti-drone systems won’t protect against some future attack method devised by Iran or another adversary. “It’s not entirely clear how to provide comprehensive protection at the scale that we’re talking about,” Vincent Carchidi (LinkedIn), a defense industry analyst at the US firm Forecast International, tells EnterpriseAM. “It’s not as simple as building a wall around your data center and being done. The types of aerial or other threats that might be posed to these data centers are going to change over time.”