Iran drone strikes leave Gulf AI hub ambitions in ruins six months on

Gulf states that had staked their ambitions on becoming global AI hubs — backed by vast oil wealth and cheap energy — have run into a geopolitical obstacle in the form of Iran. Key data centers in the UAE and Bahrain struck by Iranian drone attacks remain largely paralyzed six months later, and OpenAI has suspended a major data center contract in the region.

The two Amazon Web Services data center facilities — one in Abu Dhabi and one in Bahrain — have yet to return to normal operations six months after the drone strikes, the Wall Street Journal reported Monday (local time).

Fires and the effort to extinguish them caused widespread damage to server infrastructure. Of the more than 130 computing services at the Abu Dhabi facility and more than 140 at the Bahrain site, only five have been restored at each location.

The outages rippled into financial and corporate services. Regional banking apps, fintech platforms and corporate networks all suffered disruptions. The UAE government, which has long enforced strict data sovereignty rules, issued emergency measures temporarily allowing companies to move their data overseas.

The strikes dealt a particular blow to the UAE's AI hub ambitions. Through diplomacy with the Trump administration, the UAE had secured access to cutting-edge AI chips from Nvidia and other US companies, and had announced plans to build a massive 5-gigawatt data center complex in Abu Dhabi.

But talks with OpenAI — which had been set to lease 20 percent of the complex's initial capacity — have been suspended entirely since the attacks.

AI data centers require a minimum of $50 billion per gigawatt and are considered critical infrastructure. Gulf states, with their enormous capital reserves and power supply capacity, had been seen as natural hosts for the next wave of AI investment. But the scale of the facilities also makes them fixed, vulnerable targets in the event of military conflict.

Aaron Bartnick, a former White House technology official, said the economic logic that Gulf states had offered — abundant capital, cheap energy and rapid construction — had been "flipped 180 degrees" by the war with Iran.

The UAE is now weighing options including building some data centers below ground and deploying its own drone defense systems to guard against further attacks. Either approach would significantly raise construction costs.

Big Tech has not pulled out of the Middle East entirely. Amazon and Microsoft are pressing ahead with plans to launch data centers in Saudi Arabia before the end of the year, and Microsoft's 200-megawatt data center project in Abu Dhabi continues to move forward.

The geopolitical risk is unlikely to ease soon, however. Iran's Islamic Revolutionary Guard Corps has directly named US technology companies, accusing them of supporting attacks against Iran and issuing explicit threats against them.

"Building critical infrastructure that needs to be 100 percent operational and is essential to running the most important technology of this generation in one of the most unstable regions in the world is a very real risk," Bartnick said.