Historically data centers have always preferred colder climates. That’s why up until recently most of these projects were focused in the cooler, more northern countries.
But over the past couple of years, the rise of artificial intelligence (AI) has provoked a lot of changes in the industry. One of them is that data centers are now being built everywhere – even in hotter climates. Lately several countries in the Middle East have increased their efforts to turn the region into a literal hotbed for data centers and AI.
Many of the big names in the industry are also interested in this movement. For one, the region also needs better IT infrastructure, and the countries there have plenty of funding available to help out. Of course, some additional challenges remain with the high temperatures there being the most obvious one. But, as the old saying goes: where there’s a will, there’s a way. And there’s plenty of will in the region.
The chase for the next tech frontier
Every developed country in the world is right now allocating funds to invest in data centers, AI, and overall IT projects. The race for AI leadership is gaining steam and several Middle Eastern countries want to position themselves among the big players in the segment.
Saudi Arabia is one of them and it has announced its Vision 2030 project which has to lead the country towards diversification of its economy to include multiple sources of revenue and reduce the reliance from fossil fuels. It includes big investments for IT projects. Among the first was an entry into e-sports and investing in startups around the world. But now the country wants to bring IT inside its borders, and this includes multiple big initiatives.
One of them is called Neom. It’s a futuristic city to be built in the country and to serve as the blueprint for the future of the country. Neom will of course have a big focus on technology. The city is already under construction and the project dates back to 2017. The majority of it should be finished by 2039, but by 2030 it should be operational and already populated by its first inhabitants and businesses.
Neom will have a massive IT industry as well. Saudi Arabia’s data center developer DataVolt recently announced it will invest $5 billion for build a net-zero AI data center campus to support Neom. It will be created in Oxagon – the city’s industrial zone on the Red Sea coast, DataCenterKnowledge reports. The entire Oxagon zone will be powered by renewable energy, including green hydrogen. It will also serve as a connection point for several subsea cables.
“The Kingdom is at the forefront of the global energy transition. At Oxagon, we are accelerating a renewable energy industrial ecosystem that is set to power businesses with green energy and technology solutions,” says Vishal Wanchoo, CEO of Oxagon.
The Oxagon campus will be focused on AI workloads and will integrate multiple computing architectures. The facility has a target capacity of 1.5GW and all of the power will be green. The entire project aims to have net-zero carbon emissions and will be implemented in several phases.
The first one will feature the aforementioned $5 billion of investment and must be completed by 2028. It will feature the creation of the core infrastructure needed to guarantee that the data center will support AI and other high-performance workloads.
The net-zero goal is important for attracting foreign investors and companies, as well. All of the data center operators and the majority of their clients put a big focus on their carbon footprints, so by being able to provide net-zero data center services, Neom’s campus will attract a lot of interest.
“Data center operators are adopting net-zero pledges and the Climate Neutral Data Centre Pact as ambitious and strategic tools to adhere to regulatory pressures to curb energy demand as well as meet global decarbonization goals by 2030 and beyond. To realize low carbon operations, operators are adopting advanced cooling solutions, responsible computing, circular IT practices, and leveraging alternative energy sources like green hydrogen,” Rithika Thomas, senior analyst at ABI Research, told Data Center Knowledge.
The hottest question
Of course, there are multiple challenges to achieve these goals. The most obvious one is how will this and other data centers in the region handle the cooling?
“Looking at specific annual weather data can drive bespoke infrastructure decisions to drive energy-efficient and cost-effective methods in which they are built. Ensuring that each data center is designed to be the best fit within the environmental region that it resides in is key to lowering overall energy consumption and grid strain,” Dave Williams, senior principal at PAE Engineers.
While the overall temperatures in the region are higher, that doesn’t mean a data center can’t be cooled in a sustainable way, says Sean Farney, vice president of data center strategy in the Americas at JLL. A mixture of approaches can be used to achieve the desired results, says Farney. For example, some of the average temperatures can be raised, along with leveraging air-side economization, reducing water usage by taking advantage of advanced cooling techniques, etc. Other recommended options are replacing diesel fuel with HVO, adoption condition-based maintenance routines, and more. Farney also sees that in the long-term energy sources like hydrogen fuel cells and energy storage could also play a role in reducing costs and providing all the needed green energy for efficient cooling.
Data centers are now consuming about 1-2% of the total global electricity, says Abdullah Choudhry, chief impact officer and co-founder at carbon account platform vendor Arbor. He adds, there will be multiple challenges to keep data centers on the green side of energy consumption.
“To truly achieve net-zero, it’s essential to consider the full lifecycle of the data center. This means designing data centers with sustainability in mind: selecting low-carbon materials, adopting designs for easier upgrades, and embracing recycling and reuse strategies to minimize waste,” Choudhry says.
Is the Middle East ready?
Most definitely. According to a report by FTI Delta and Capacity media, the telecommunications sector in the Middle East will invest more than $5 billion by 2026. Much of that money will go towards AI in telecommunications and data centers.
All these efforts are already paying off. Tencent Cloud, one of Asia’s biggest cloud service providers, announced it will launch its first Middle East Cloud Region in Saudi Arabia. “Announced at the LEAP 2025 technology summit in Riyadh, the new cloud region will encompass two availability zones, each designed with full redundancy to ensure robust and reliable services. This development is slated to become operational by 2025, aligning with Saudi Arabia’s ambitious Vision 2030 objectives to foster digital transformation and economic diversification,” the company says.
The initiatives include an investment of at least $150 million. “Saudi Arabia’s cloud computing market is experiencing rapid growth, driven by the government’s proactive digital initiatives and the private sector’s increasing adoption of cloud technologies. Projections indicate that annual spending on public cloud services in the Kingdom is expected to reach $2.5 billion by 2026, reflecting a compound annual growth rate of 25%. This surge is attributed to the nation’s focus on emerging technologies, including AI, cloud computing, and the Internet of Things, as integral components of its Vision 2030 plan,” says the release.
Microsoft is also joining with its own set of initiatives. Again, during LEAP 2025, the IT giant and the National IT Academy of Saudi Arabia announced the launch of their Microsoft Datacenter Academy. This is a “two-year commitment to empower students with a focus on building applied datacenter skills, thereby enhancing their employability in high-demand technical roles and contributing to the Kingdom’s economic diversification”.
The project follows a recently announced creation of three Azure Availability Zones and a Microsoft data center region to be built in Saudi Arabia by 2026. “Microsoft’s datacenter region in Saudi Arabia is expected to have a transformative impact on the Kingdom’s cloud market which is expected to grow at a CAGR of 23.4 percent to reach $3.9 billion in 2027.”
The Middle East data center market is poised for significant growth, with a projected compound annual growth rate (CAGR) of seven per cent between 2021 and 2026, says an analysis by ACN.
And while Saudi Arabia is definitely putting a lot of effort in the sector, it’s not the only country to do so. The UAE is the main competitor when it comes to data centers. Both countries have 46 co-location facilities as of H1 of 2024 with multiple projects in the pipeline.
“The UAE’s data centre industry is seeing rapid growth. It has US $1.2 billion of active data centre projects and a future project pipeline of US $433 million. In Dubai especially, government initiatives such as the Dubai Data Initiative, the Dubai Blockchain Strategy, the Happiness Agenda, the Dubai AI Roadmap and the Dubai Paperless Strategy have led to high demand for these facilities. The Emirates already have one of the highest data consumption levels in the region with 99% of the population active online. This is why Dubai leads as the primary data centre market, followed by Abu Dhabi,” says an analysis by Savills. Furthermore, the UAE real estate giant Damac is planning to invest $3 billion in data centers in Southeast Asia as a new business arm.
So, the region is definitely ready and is already hard at work to develop its IT infrastructure and attract investments from data center operators. The countries and companies are positioning themselves as international players by investing both in foreign and domestic projects. They have both the strategic vision and the resources to achieve their goals and are working to become the AI infrastructure hub of the entire EMEA region.