Gulf countries are rapidly expanding their investments in artificial intelligence and data centre infrastructure as they prepare for a future beyond oil. Yet this new phase of economic diversification also exposes the region to a range of new challenges, including critical infrastructure risks, technological reliance, talent shortages, and growing pressure on essential resources.
Key Figures
- More than USD 250 billion invested over the past two decades by Gulf countries in AI, advanced data centres, gaming, and digital ecosystems.
- Slightly over 1% of existing global data centre capacity, but close to 7% of capacity currently under construction and nearly 6% of future planned capacity.
- Between 1 and 5 million litres of water per day may be required to cool a typical hyperscale data centre.
The Gulf accelerates Its AI ambitions
Countries within the Gulf Cooperation Council (GCC) are increasingly positioning themselves as emerging hubs for artificial intelligence and digital infrastructure. Backed by sovereign wealth funds and long-term economic diversification programmes, governments across the region are investing heavily in AI, cloud services, data centres and broader digital ecosystems. Growth has been particularly rapid. While the region's current share of operational global data centre capacity remains relatively modest, its presence is far more significant when considering projects under development and future expansion plans.
Saudi Arabia and the United Arab Emirates are leading this transformation. Riyadh and Abu Dhabi are expected to become the Gulf's primary AI and hyperscale data centre hubs, supported by large-scale digital infrastructure projects and strategic partnerships with major global technology companies.
Diversification is creating new forms of dependence
The region's digital expansion is supported by several competitive advantages, including affordable energy, substantial financial resources, advanced desalination infrastructure, and a strategic location linking Europe, Asia and Africa. However, these strengths do not eliminate vulnerabilities. Instead, they shift them into new areas.
The Gulf's AI ambitions remain heavily reliant on foreign technologies, particularly semiconductors, advanced graphics processing units (GPUs), major cloud service providers and export authorisations governing access to critical technologies. The region has yet to develop a fully mature domestic ecosystem for semiconductor production and advanced software architecture. This reliance extends beyond technology alone. Competition for highly qualified professionals in AI, cloud computing and semiconductors is intensifying worldwide, making access to specialised talent another key dependency for the region.
Digital Infrastructure Is Becoming a Critical Asset
As Gulf economies continue their digital transformation, data centres, subsea cables, cloud platforms and digital networks are becoming increasingly strategic infrastructure. These assets now support essential functions including financial services, digital government platforms, smart city projects and the digital supply chains used by businesses.
In a region characterised by geopolitical uncertainty, this growing dependence creates a new category of country risk. Large-scale data centres could become physical targets, while undersea cables represent additional points of vulnerability.
Resource constraints add another layer of risk. In a region where freshwater remains scarce and largely dependent on desalination, expanding large-scale computing infrastructure may increase competition between industrial, residential and digital water consumption.
For companies operating in or with the region, the Gulf's AI expansion therefore extends beyond technological innovation. It raises practical concerns around operational resilience, supplier concentration risks, business continuity and exposure to critical digital infrastructure.
The Gulf’s race for AI illustrates a profound shift: post-oil diversification does not eliminate vulnerabilities; it creates new ones.
Data centers, semiconductors, talent and resources are now becoming assets that are just as strategic as energy infrastructure.
- Seltem Iyigun, Middle East economist at Coface.
