Amazon, Google and Microsoft Built AI Infrastructure in the Persian Gulf

In 2019, Amazon built its first data center in the Persian Gulf—in Bahrain. Three years later, the company expanded its presence by launching infrastructure in the United Arab Emirates. In 2024, it announced new projects in Saudi Arabia worth more than $10 billion.

These investments allowed Amazon to secure a foothold in one of the world’s fastest-growing regions, where governments and well-funded investors are seeking a place in the emerging digital economy and the race for artificial intelligence.

“We look forward to helping drive innovation and develop talent across the kingdom,” Amazon chief executive Andy Jassy said during a visit to Saudi Arabia last year alongside President Donald Trump and other technology executives.

However, Jassy’s plans were thrown into jeopardy on March 1, when Iranian drones damaged an Amazon data center in Bahrain and struck two other company facilities in the United Arab Emirates. Many customers who relied on these centers for computing power remain in limbo.

Two weeks after the start of the U.S.—Israeli war against Iran, American technology companies are confronting a new reality in the Persian Gulf. The region—long seen as a safe destination for investment thanks to cheap energy, light regulation and political stability—has become a crucial hub for building the data centers needed to develop and deliver artificial intelligence software. Google, Microsoft, OpenAI and other American firms flocked to the area, drawn by fast-growing economies and convenient data routes linking Africa and Europe.

According to the research firm IDC, total spending on consumer and enterprise technology in the Middle East reached roughly $65 billion last year—up from $36 billion in 2020. Spending on data center and cloud infrastructure technologies rose 75 percent over the past year, reaching $895 million.

But as the war drags on, the investments of technology giants in the region are beginning to look increasingly vulnerable.

This week, Iran threatened to expand attacks against the “enemy’s technological infrastructure” belonging to seven American companies—Amazon, Microsoft, Google, Palantir, Nvidia, IBM and Oracle. On Thursday, the country’s new supreme leader, Mojtaba Khamenei, heightened concerns, declaring in vague terms that Iran would “open other fronts where the enemy has little experience.”

With the backing of President Trump, who helped broker agreements between American technology giants and the countries of the Persian Gulf, the companies long played down the geopolitical risks of placing critical infrastructure in one of the world’s most volatile regions. Now the strategy the Trump administration promoted as a key advantage in the race for artificial intelligence risks turning into a serious vulnerability—because of a war launched by that same administration.

In recent weeks, the technology industry has confronted problems that oil companies and international banks have been dealing with for decades. Investments worth billions of dollars in artificial intelligence have suddenly come into question.

“The energy sector is far more experienced in managing traditional geopolitical risks than the technology industry,” said Steffen Hertog, a professor at the London School of Economics and Political Science who specializes in the economies of the Persian Gulf. “Most investors outside the energy sector underestimated the region’s risks before the current war—including American technology companies.”

After Iranian drones damaged Amazon’s data centers, many companies in the region lost access to their networks.

“They were taken offline,” said Simon Williams, a former Amazon employee who now holds a senior role at the Dubai-based company Atelic AI. “We completely lost access to our servers. It hit our business hard.”

Williams believes the region will remain attractive for technology investment in the long term. But he has so far been unable to reach Amazon representatives to restore access to important materials stored in the company’s cloud.

“It has become something of a black box,” he said. “They didn’t have the most reliable disaster-recovery system.”

In a statement, Amazon said it was “adjusting operations in response to the evolving situation, including temporary pauses where necessary.”

Google said it was monitoring developments and that “our focus is on the safety and well-being of our employees in the region.” Microsoft declined to comment.

Dave Komendat, Boeing’s former chief security officer, said data centers are becoming attractive targets during conflicts because they represent a new form of critical infrastructure. After the strikes on Amazon’s facilities, he said, companies will pay closer attention to security considerations when choosing locations for construction.

“This is a rare but extremely significant event,” said Komendat, who is now a partner at the consulting firm Corporate Security Advisors. “It may never happen again—or it may happen ten more times.”

The episode underscores how central a role American technology giants are beginning to play in geopolitical conflicts, as they place key technological capacity in regions that could become chokepoints in the global system.

The expanding consequences of the war with Iran are expected to ripple through the technology industry as well. Possible effects include disruptions to supply chains, a sharp rise in the price of natural gas used to power data centers, and higher costs for raw materials such as plastics and aluminum used in the production of electronic components.

“The real weapon is not the drone but the canceled insurance policy, the rerouted tanker and the investor who presses pause,” a recent report by the think tank Strategy International said.

Vulnerabilities in technological infrastructure are visible in other parts of the world as well. China controls a significant share of global hardware manufacturing. In Taiwan—which Beijing has repeatedly threatened to take by force—a single company, TSMC, produces most of the world’s most advanced microchips. And factories in South Korea, within range of North Korean artillery, manufacture a substantial share of global memory chips.

According to Xiaomeng Lu, director at the consulting firm Eurasia Group, which analyzes the intersection of technology and geopolitics, the war with Iran could complicate efforts by Persian Gulf countries to attract the world’s largest technology companies—particularly to the United Arab Emirates, which lies next door to Iran.

“Their ambitions are based on the assumption of geopolitical stability,” she said.

The scale of the war’s long-term consequences may depend largely on how it ends. If the conflict leads to the emergence of a new leadership in Iran that is less confrontational toward the United States and Israel, it could bring greater stability and investment to the region, Lu said. But if the current government weakens while remaining in power, the risk of new shocks and conflicts is likely to grow in the coming years.

“Time plays a critical role,” she said. “If the war ends within a month, it will be forgotten. If it drags on for many months, the situation will be entirely different.”