Tech companies have poured billions of dollars into AI infrastructure projects in the Middle East in recent years, leveraging cheap and readily available energy and land and support from local governments.
But the Iran war has spilled over into neighboring countries in the Middle East, raising questions about the future of data centers and digital infrastructure in the region, especially if the conflict drags on, experts told CNBC.
Data centers are already being targeted. A series of Iranian retaliatory attacks targeted AWS facilities in the UAE and Bahrain, disrupting banking, payment, enterprise, and consumer services.
While the Iran war is not likely to cause hyperscalers to back off from building existing AI infrastructure in the region, it could impact future investments if hostilities drag on.
Patrick J. Murphy, executive director of geopolitics at Hilco Global, told CNBC there could be a “change in where the next wave of capacity is built.”
“If geopolitical risks continue to rise in the Gulf, companies may accelerate projects in regions such as Northern Europe, India, and Southeast Asia, where power supplies, regulatory frameworks, and security situations are more predictable.”
“Target of attack”
The Middle East is quickly becoming a key hub for technology companies looking to build infrastructure to support the AI boom.
A concerted push by regional governments to withdraw from China to attract international investment and appease the US government has borne fruit.
oracle, Nvidia and Cisco All are participating in OpenAI’s AI campus (called Stargate) in the United Arab Emirates, which will span 10 square miles and have a capacity of 5 gigawatts, in collaboration with Emirati company G42. Saudi Arabian company Humain is pouring billions of dollars into building AI infrastructure. microsoft announced that it would invest $15 billion in the UAE by 2029.
But security considerations for facilities powering the region’s digital infrastructure have come under intense scrutiny over the past week following attacks by Iran.
Aalok Mehta, director of the think tank Center for Strategic and International Studies, said such airstrikes suggest data centers could be “considered legitimate targets in modern armed conflicts.” “This will revolutionize the way companies think about data center security going forward.”
He added that AI infrastructure companies are likely to develop contingency plans in light of this situation. “Either consider moving to less vulnerable regions or fortify current and future data centers with missile defense and anti-drone technology.”
Guests look at a model of the UAE’s largest data center being built in Abu Dhabi as part of the Stargate Initiative, a joint venture between G42, Microsoft and OpenAI, during the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in Abu Dhabi on November 3, 2025 (Photo: Giuseppe CACACE/AFP) (Photo: GIUSEPPE CACACE/AFP via Getty Images)
Giuseppe Cacasse | AFP | Getty Images
long-term conflict
It remains a big draw for companies looking to build AI infrastructure in the Middle East.
“The region remains attractive to businesses because of its sovereign wealth funding, government buy-in, available energy, and its role as a gateway to Global South markets,” Tess Devran Knowles, senior director at the Atlantic Council think tank, told CNBC.
Middle Eastern governments will also be eager to reassure American companies and push them to maintain their commitments in the region.
“The UAE believes the development of AI is critical to its future and is betting big on the technology,” Mehta said. “The company has invested billions of dollars to support the transition to AI and has also played a central role in facilitating many large-scale AI infrastructure partnerships.”
Given the huge costs invested in power contracts, land contracts, fiber connectivity, and already operational facilities, it is unlikely that AI hyperscalers will consider redeploying the capacity they have already built.
“To ensure low-latency, reliable service, data centers typically need to be located close to customers,” Tancrede Fulop, senior equity analyst at Morningstar, told CNBC. “Accordingly, facility relocation or closure could lead to service level agreement violations and reputational risks.”
But scenario planning for the Iran war and its broader Middle East impact will weigh heavily on investment committees and boards.
Debran Knowles said that rather than withdrawing from the region, companies could take steps to “hedge their investments” by delaying new capital deployments or pausing planned partnerships.
It added that if conflict continues or escalates, such hedging could transition to “assessing alternative regional hubs to reduce the risk of exposure to sustained disruption from broader regional conflict.”
The Iran war could cause a “slowdown” in the region for digital infrastructure developer Pure Data Center Group, which operates data centers in Riyadh and Abu Dhabi and plans further expansion in the Middle East, the company’s chairman and interim CEO Gary Wojtaszek told CNBC.
“The week before that, I would have thought, ‘Isn’t this amazing?'” Wojtaszek said, referring to the energy and capital available in the Middle East. And now I’m like, okay, well, maybe I can slow down here.”
“But I think eventually hostilities will subside,” he said, adding that in the future “there will be more emphasis on development there.”
Mehta said companies may start doing cost-benefit calculations to guide future investment plans.
“They will ask questions like: How long will this war last? How much will new hardening measures cost? Are there suitable alternative locations for data center construction? How much delay will moving to an alternative location cause?”
google and microsoft He declined to comment on how the Iran war is affecting data center and AI infrastructure projects in the region. AWS, G42, Humain, and OpenAI did not respond to requests for comment by the time of publication.
