Race for AI Supremacy in Middle East Is Measured in Data Centers

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Race for AI Supremacy in Middle East Is Measured in Data Centers

By Marissa Newman et al., | Bloomberg Businessweek | April 11, 2024

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Saudi Arabia and the UAE both want to become the regional AI superpower, and their budding rivalry has kicked off a race to build expensive desert data centers to support the technology. Data centers alone won’t transform any country into an AI heavyweight, but no country can become one without them. Countries want the facilities within their borders for technological reasons—being close to customers can ease access to services and speed it up—and for geopolitical reasons, because the valuable data housed in the servers will be subject to local regulations and insulated from foreign meddling.

In Saudi Arabia, where the economy still relies heavily on hydrocarbons, AI tech is part of Crown Prince Mohammed bin Salman’s Vision 2030 strategy, which aims to identify new revenue sources. It has launched major research centers and ministries devoted to AI and produced large-language models similar to OpenAI Inc.’s ChatGPT, as has the UAE. And both counties are hoarding thousands of customized chips and are enthusiastically investing more in this area.

The Gulf countries lag Western Europe in data centers. At the end of 2023 the UAE had 235 megawatts of data center capacity and Saudi Arabia had 123 megawatts, compared to Germany’s 1,060 megawatts, according to research firm DC Byte. To close the gap, the UAE is planning to expand capacity by 343 megawatts, and Saudi Arabia says it wants to add 467 megawatts over the next few years.

The economic stakes are high. A recent report from PwC estimates that by 2030 AI will contribute $96 billion to the UAE’s economy and $135 billion to Saudi Arabia’s, putting the two states behind only China and North America as regions where AI will have the greatest impact on gross domestic product. Many observers also describe an unspoken antipathy between Saudi Arabia and the UAE.

The biggest challenge may be just ensuring that the heat-producing, water-guzzling computing facilities needed for advanced AI can operate effectively in the desert. The latest chatbots and AI models are computationally intensive.  When servers use that much energy, the equipment gets much hotter much faster, which can lead to expensive outages or even damage. Many operators in the Gulf are turning to novel techniques.

Once those data centers do go up, there’s still the daunting task of creating a tech ecosystem from scratch. Mechanical engineers, facility managers and other kinds of technicians are scarce in the Gulf.  The UAE and Saudi Arabia have tried to attract American and European startups with promises of computing resources and tax breaks, but only a handful have taken them up on the offers.

So far, none of these challenges has deterred companies such as Equinix to invest more.

3 key takeaways from the article

1. Saudi Arabia and the UAE both want to become the regional AI superpower, and their budding rivalry has kicked off a race to build expensive desert data centers to support the technology. Data centers alone won’t transform any country into an AI heavyweight, but no country can become one without them.  Both counties are hoarding thousands of customized chips and are enthusiastically investing more in this area.
2. The economic stakes are high. A recent report from PwC estimates that by 2030 AI will contribute $96 billion to the UAE’s economy and $135 billion to Saudi Arabia’s, putting the two states behind only China and North America as regions where AI will have the greatest impact on gross domestic product.
3. Once those data centers do go up, there’s still the daunting task of creating a tech ecosystem from scratch. Mechanical engineers, facility managers and other kinds of technicians are scarce in the Gulf. 

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Topics:  Data Cetners, Infrastructure, Startups, Technology Firms