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Article: Big Tech's uncertain future in the Persian gulf

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Persian Gulf monarchies have aggressively used their sovereign wealth to attract major U.S. tech and financial investment, aiming to diversify beyond oil and build a global AI infrastructure hub.

The recent military conflict with Iran, including attacks on data centers in the UAE and Bahrain, has abruptly destabilized this economic relationship, creating severe anxiety about the security and future of trillions in investments.

Key vulnerabilities now in focus include critical undersea data cables in strategic waterways, which are essential for global internet connectivity but are seen as potential targets for disruption.

Main topics: Gulf economic diversification and AI investment, impact of Iran conflict on business and infrastructure, vulnerability of undersea data cables.

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https://economictimes.indiatimes.com/tech/artificial-intelligence/big-techs-uncertain-future-in-the-persian-gulf/articleshow/129253115.cms

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Tech-Economic Times

Published Date

2026-03-08 05:18

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2026-03-08 02:30

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2026-03-08 02:31

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For years, Persian Gulf monarchies like the United Arab Emirates, Bahrain and Qatar have lured US tech companies and Wall Street capital to team up on projects, dangling friendly investment terms and opulent office hubs with luxury towers, cappuccino bars and bikini-friendly beach clubs.
Deploying their giant sovereign wealth funds, the governments of these countries have moved aggressively to break their overwhelming dependence on oil and gas revenues. And investors, seeking lucrative new markets, have rushed to oblige.
Silicon Valley, in particular, has bought into the Persian Gulf. Tech giants including Nvidia, Microsoft and Oracle all poured money into large-scale facilities across the region, including data centers to power their enormous and growing bets on artificial intelligence.
But the war with Iran suddenly threatens to undermine that cozy business relationship.
The scope of the conflict has stunned the Gulf nations and their Western business partners over the past week, and raised serious questions for both about the future of these investments -- with trillions of dollars hanging in the balance.
After the United States and Israel launched coordinated strikes against Iran last weekend, the Iranians' response included attacks against nonmilitary targets in countries across the region.
Iranian drones hit two Amazon Web Service data centers in the UAE and damaged one in Bahrain earlier in the week. Schools and offices have gone remote. The United States shut its embassies in Kuwait, Lebanon and Saudi Arabia.
On Thursday, a billionaire businessman in Dubai lashed out at President Donald Trump on social media for starting the war. The Financial Times reported on Friday that a handful of Gulf states were considering whether to pull back on overseas investments because of the financial impact of the conflict.
Anxiety is "through the roof," Mona Yacoubian, Middle East program director at Washington's Center for Strategic and International Studies, said, describing the mood at an iftar dinner in Washington this week.
Trillions of Dollars in Play
For Western investors, the stakes have been rising as AI spending surges in the Persian Gulf. Stargate UAE, operated by OpenAI and Oracle and powered by top-line Nvidia chips, started in May with a splashy ceremony in Abu Dhabi, featuring OpenAI's Sam Altman and Nvidia CEO, Jensen Huang. It is set to be the world's biggest data center outside the United States.
In December, the State Department unveiled "Pax Silica," a declaration signed by 11 countries, including Israel, the UAE and Qatar, pledging to coordinate development of AI infrastructure.
Gulf countries could be an important part of the build-out, given their prized advantages: Wedged between Asia, Africa and the Middle East, and a middle distance from Europe, the region has plentiful land, cheap electricity and willing populations.
Data centers have already proliferated across the Persian Gulf, with 61 in Saudi Arabia and 57 in the Emirates, according to DataCenter Map, an industry intelligence tool. All that makes the Gulf "an emerging epicenter of AI infrastructure globally," Yacoubian said.
But risks that seemed remote a week ago now look far more real -- with the potential to spread beyond the region. "The vulnerability is no longer hypothetical," said Kristian Alexander, senior fellow and lead researcher at the Rabdan Security & Defense Institute in Abu Dhabi.
Undersea Cables Are Sitting Ducks
Among the highest risk factors could be the fiber-optic cables that snake under the Strait of Hormuz and the Red Sea -- the region's two choke points, not only for oil shipments but for data, too. Among the world's most concentrated digital corridors, they are crucial to keeping parts of Europe and Asia connected to the internet, and experts fear they could be sabotaged, or entangled or dislodged amid chaotic fighting.
Such an event has already occurred. In 2024, four major Red Sea undersea cables were damaged when Houthi rebels struck a ship, disrupting about a quarter of the data traffic linking Europe and Asia, including the Middle East. Although data was quickly rerouted, it took months to fully restore the cables.
"It shows how quickly connectivity can be degraded, rather than fully go dark," Alexander said.
Land-based infrastructure could also be at risk. On Tuesday, debris from intercepted Iranian drones fell into an oil storage area in Fujairah, a UAE port city that is also the site of a major cable hub. That underscored the twin threats that the tech and AI ecosystem now faces: cyberattacks that can be launched remotely, and wartime strikes that can hit directly.
"The threat picture is now blended," Alexander said.
A Reality Check
Until a week ago, the violent risks seemed far-fetched. "Before Feb. 28, the assumption was that a cyber risk was constant but kinetic risk was low probability," Alexander said.
Indeed, for years, investors in the Persian Gulf have felt worlds removed from the Middle East's political strife.
But to some observers, that feeling of safety seemed to be an illusion. In 2023, two weeks before Hamas waged a massacre on Israelis, setting off the Gaza war, Matt Gertken, chief geopolitical analyst for BCA Research, traveled to the Gulf to meet with hedge funds and other Western investors. He offered a dire warning, telling them that the Israelis appeared set to bomb Iran's nuclear facilities at some point, and that the United States was likely to join them. That could lead to a widening regional war, he told them, potentially threatening their business -- perhaps even their Gulf lifestyle.
Investors were deeply skeptical. "I do geopolitical forecasting for a living," Gertken said. "But I was sensitive to the fact that I was in Dubai saying: 'You know, things are going to get bad for a while. It is not what people wanted to hear. It was very contrarian."
This week has shifted the calculus. Alexander said Gulf officials were considering how to harden defenses of their data centers and tech networks, including possibly engineering new infrastructure to withstand missile strikes rather than just cyberattacks, which were regarded as the main vulnerability until now.
"The risk was understood in strategic circles," Alexander said. "But many mitigation efforts were still oriented towards cybersecurity."
In just one week, the war has greatly expanded the risks.
This article originally appeared in The New York Times.
Deploying their giant sovereign wealth funds, the governments of these countries have moved aggressively to break their overwhelming dependence on oil and gas revenues. And investors, seeking lucrative new markets, have rushed to oblige.
Silicon Valley, in particular, has bought into the Persian Gulf. Tech giants including Nvidia, Microsoft and Oracle all poured money into large-scale facilities across the region, including data centers to power their enormous and growing bets on artificial intelligence.
But the war with Iran suddenly threatens to undermine that cozy business relationship.
The scope of the conflict has stunned the Gulf nations and their Western business partners over the past week, and raised serious questions for both about the future of these investments -- with trillions of dollars hanging in the balance.
After the United States and Israel launched coordinated strikes against Iran last weekend, the Iranians' response included attacks against nonmilitary targets in countries across the region.
Iranian drones hit two Amazon Web Service data centers in the UAE and damaged one in Bahrain earlier in the week. Schools and offices have gone remote. The United States shut its embassies in Kuwait, Lebanon and Saudi Arabia.
On Thursday, a billionaire businessman in Dubai lashed out at President Donald Trump on social media for starting the war. The Financial Times reported on Friday that a handful of Gulf states were considering whether to pull back on overseas investments because of the financial impact of the conflict.
Anxiety is "through the roof," Mona Yacoubian, Middle East program director at Washington's Center for Strategic and International Studies, said, describing the mood at an iftar dinner in Washington this week.
Trillions of Dollars in Play
For Western investors, the stakes have been rising as AI spending surges in the Persian Gulf. Stargate UAE, operated by OpenAI and Oracle and powered by top-line Nvidia chips, started in May with a splashy ceremony in Abu Dhabi, featuring OpenAI's Sam Altman and Nvidia CEO, Jensen Huang. It is set to be the world's biggest data center outside the United States.
In December, the State Department unveiled "Pax Silica," a declaration signed by 11 countries, including Israel, the UAE and Qatar, pledging to coordinate development of AI infrastructure.
Gulf countries could be an important part of the build-out, given their prized advantages: Wedged between Asia, Africa and the Middle East, and a middle distance from Europe, the region has plentiful land, cheap electricity and willing populations.
Data centers have already proliferated across the Persian Gulf, with 61 in Saudi Arabia and 57 in the Emirates, according to DataCenter Map, an industry intelligence tool. All that makes the Gulf "an emerging epicenter of AI infrastructure globally," Yacoubian said.
But risks that seemed remote a week ago now look far more real -- with the potential to spread beyond the region. "The vulnerability is no longer hypothetical," said Kristian Alexander, senior fellow and lead researcher at the Rabdan Security & Defense Institute in Abu Dhabi.
Undersea Cables Are Sitting Ducks
Among the highest risk factors could be the fiber-optic cables that snake under the Strait of Hormuz and the Red Sea -- the region's two choke points, not only for oil shipments but for data, too. Among the world's most concentrated digital corridors, they are crucial to keeping parts of Europe and Asia connected to the internet, and experts fear they could be sabotaged, or entangled or dislodged amid chaotic fighting.
Such an event has already occurred. In 2024, four major Red Sea undersea cables were damaged when Houthi rebels struck a ship, disrupting about a quarter of the data traffic linking Europe and Asia, including the Middle East. Although data was quickly rerouted, it took months to fully restore the cables.
"It shows how quickly connectivity can be degraded, rather than fully go dark," Alexander said.
Land-based infrastructure could also be at risk. On Tuesday, debris from intercepted Iranian drones fell into an oil storage area in Fujairah, a UAE port city that is also the site of a major cable hub. That underscored the twin threats that the tech and AI ecosystem now faces: cyberattacks that can be launched remotely, and wartime strikes that can hit directly.
"The threat picture is now blended," Alexander said.
A Reality Check
Until a week ago, the violent risks seemed far-fetched. "Before Feb. 28, the assumption was that a cyber risk was constant but kinetic risk was low probability," Alexander said.
Indeed, for years, investors in the Persian Gulf have felt worlds removed from the Middle East's political strife.
But to some observers, that feeling of safety seemed to be an illusion. In 2023, two weeks before Hamas waged a massacre on Israelis, setting off the Gaza war, Matt Gertken, chief geopolitical analyst for BCA Research, traveled to the Gulf to meet with hedge funds and other Western investors. He offered a dire warning, telling them that the Israelis appeared set to bomb Iran's nuclear facilities at some point, and that the United States was likely to join them. That could lead to a widening regional war, he told them, potentially threatening their business -- perhaps even their Gulf lifestyle.
Investors were deeply skeptical. "I do geopolitical forecasting for a living," Gertken said. "But I was sensitive to the fact that I was in Dubai saying: 'You know, things are going to get bad for a while. It is not what people wanted to hear. It was very contrarian."
This week has shifted the calculus. Alexander said Gulf officials were considering how to harden defenses of their data centers and tech networks, including possibly engineering new infrastructure to withstand missile strikes rather than just cyberattacks, which were regarded as the main vulnerability until now.
"The risk was understood in strategic circles," Alexander said. "But many mitigation efforts were still oriented towards cybersecurity."
In just one week, the war has greatly expanded the risks.
This article originally appeared in The New York Times.