Are Middle East Data Centres Still A Viable Investment?

Authored by Charley Dennis

For the first time, data centres have become targets during conflict as tensions linked to the Iran war escalate across the Middle East.

On the 1st of March this year, four AWS data centres were struck by drones in the UAE and Bahrain, causing extensive damage to facilities. Iran took responsibility and made the startling claim that this infrastructure is now a legitimate wartime target.

This is prompting questions about the safety of tech investment in the region.

Gulf countries have big dreams of becoming hubs for data centres and tech infrastructure; the UAE’s data market was expected to double by 2031, according to EuroNews, and surrounding countries have been keen to attract investment. The Gulf Cooperation Council (GCC) data centre market was expected to grow from roughly $3.5 billion in 2024 to nearly $9.5 billion by 2030, with a strong focus on AI-ready infrastructure.

These developments have posed serious questions about the probability of that growth. As stability in the region appears increasingly uncertain, and tech infrastructure itself becomes a potential military target, investors are starting to ask whether putting money into these AI projects is still a viable bet.

Why Was the Middle East a Smart Tech Investment?

Before the conflict escalated, the GCC was undergoing a transformative process, as it aimed to move away from its reliance on oil and diversify its economy. Tech infrastructure, especially in the realms of data and AI, was at the forefront of this shift. The IMF projected 3.5% growth in 2025 and another 4.6% in 2026. These countries were positioning themselves as attractive destinations for Western investors as the global AI boom accelerated.

Beyond these projections, the Gulf offered several structural advantages for the global tech sector. Energy costs remain among the lowest in the world, a major advantage for building data centres given their intensive electricity demands. The region also maintains strong relationships with both China and the US, both of which have invested billions in the GCC’s economic transformation.

Governments in the UAE and Saudi Arabia were also pouring billions into digital infrastructure themselves as part of their diversification strategies. Saudi Arabia’s Project Transcendence allocated $100 billion toward building data centres and supporting startups to develop a new tech hub, while the UAE aimed to reach similar levels of investment by 2030.

Hyperscale data infrastructure was at the forefront of the GCC’s ambitions and Western backers were increasingly buying into the vision. However, this recent conflict has reignited long-standing concerns around stability in the region, and investors are beginning to reassess the risks.

Is the Gulf Still a Smart Investment?

There are currently more than 110 data centres across the GCC, and many of them could now be viewed as potential strategic targets in a wider conflict. The IRGC specifically named companies such as Microsoft, Nvidia and Palantir as potential targets in the region, referencing the role their technologies play in Western intelligence and defence systems.
The reaction from the cloud services market to these strikes was, however, surprisingly muted.

There was no major sell-off in tech stocks. This is partly due to the globally distributed infrastructure of companies like AWS and Microsoft, which operate hundreds of facilities across multiple continents. Investors also expect these firms to adapt to new security challenges. It is also worth noting that the continued surge in demand for AI infrastructure likely helped stabilise investor confidence.

The value of data centres themselves, however, was impacted more significantly. Analysts reported that valuations for some infrastructure assets exposed to the region fell by as much as 15%, wiping roughly $12 billion in market value, according to BISNOW. Similar movements were seen across data-centre focused real estate firms, with some analysts describing it as the sector’s biggest sell-off since the 2008 financial crisis.

This represents a significant blow to hopes of rapid expansion in data centre infrastructure across the region. However, major cloud providers themselves have not turned their backs on the Gulf.

What is the Future for Tech in the Middle East?

Rather than abandoning the region entirely, tech companies appear to be recalculating the cost of operating there.
Data centres are already designed with significant physical security and redundancy, but the threat of drone and missile strikes may push operators to invest further in hardened infrastructure and backup facilities across multiple regions. Anti-drone technology is rapidly developing and its demand in the region is certain to grow.

Despite the recent attacks, major firms continue to show confidence in the Gulf’s long-term tech ambitions. No major tech company has signalled any plans to withdraw or slow down investment, and some reports indicate they are just rerouting workloads to offset the current risks.

The key question isn’t whether the Gulf will play a role in the global data economy, but how much risk they are willing to accept in building it. The region still offers cheap energy, strong government backing and growing demand for AI infrastructure. The attacks simply highlight a new risk, but one investors must take into account.