The Gulf’s AI Nightmare Came Courtesy of an Iranian Drone

Less than a week after the U.S. and Israel launched strikes on Iran, Iran retaliated by launching waves of drones targeting the Gulf's cutting-edge data centers. These attacks have left the damaged Amazon Web Services facilities in Abu Dhabi and Bahrain largely out of commission, with the tech giant urging clients to relocate their data to other regions while repairs are underway.

The attacks have put a strain on the Gulf states' efforts to become world leaders in data processing, particularly in the field of artificial intelligence. The attacks add a significant new risk for U.S. companies considering investments in the region, which can reach into the tens of billions of dollars. The U.A.E. had previously negotiated with the U.S. to secure access to advanced AI chips, and even secured a deal with OpenAI to be the first tenant at a data center complex that would require 5 gigawatts of power. However, the OpenAI lease deal has reportedly stalled.

Data centers, which are far larger and more expensive than the cloud-computing facilities hit during the attacks, are particularly vulnerable due to their high cost and the AI chips required. The U.A.E.'s land, strong state backing, and easy permitting were previously attractive factors, but the physical risk of placing $50 billion-plus facilities within 200 miles of Iran in a region prone to conflict is altering the equation.

The U.A.E. Foreign Ministry and Abu Dhabi government media office did not respond to requests for comment.

Amazon Web Services is working to restore services at its Bahrain and U.A.E. facilities and has provided billing relief to affected customers. The U.A.E. has faced the brunt of Iran's attacks, receiving over 2,800 drones and missiles, compared to Iran's strikes on Israel. To address the risk of future attacks, the U.A.E. has considered building data centers underground and placing drone defense systems near computing centers. However, these measures could significantly increase costs.

Despite the setbacks, some tech companies are still moving forward with data-center projects in the Gulf, hoping the war will end and capitalizing on the region's abundant capital. Amazon and Microsoft have announced plans to launch data centers in Saudi Arabia by the end of the year. Cloud-service providers generally prefer having data centers close to busy commercial nodes, but the risks from the attacks are changing the calculus for these projects.