The UAE is transforming from an oil-based economy to a hub for artificial intelligence. The country is rapidly building hyperscale data centers to serve as the Middle East’s AI infrastructure backbone. Massive investments and global partnerships are turning digital pipelines into national growth engines.
UAE data center investment has earned the country recognition as a leading AI power, alongside the US and Saudi Arabia. The government and private companies are working together to ensure the region can host world-class AI operations. These projects also aim to address sustainability and energy challenges.
Microsoft invested $1.5 billion in Emirati technology firm G42, supporting the creation of a $1 billion AI fund across the Middle East, Central Asia, and Africa. This funding enabled G42’s subsidiary, Khazna Data Centers, to lead the UAE’s hyperscale expansion. Khazna now controls over 70 percent of the national data center market.
The UAE is also advancing cloud computing. G42’s subsidiary, Core42, signed a multi-billion-dollar deal with Microsoft and the Abu Dhabi government to develop a sovereign cloud system. This infrastructure aims to modernize public sector services and support Abu Dhabi’s goal of becoming a fully AI-native government.
Private equity partnerships have further strengthened the market. US investment firm KKR joined Emirati conglomerate Etisalat by e&, committing $5 billion to expand data centers across Gulf nations. These partnerships aim to meet growing AI workloads and national digital agendas efficiently.
The UAE’s Stargate project, a $500 billion AI campus in Abu Dhabi, is set to become one of the world’s largest AI data center networks. The campus will operate with 5 gigawatts of power and host up to 500,000 Nvidia chips yearly. Stargate involves G42 and global partners, including OpenAI, Nvidia, Oracle, Cisco, and Japan’s SoftBank Group.
Khazna ensures operations remain sustainable by using recycled water and energy-efficient cooling technologies. The company also invests in direct liquid cooling and immersion solutions to support high-density AI chips in extreme heat. These measures maintain performance while reducing environmental impact.
Geopolitical considerations shape UAE data center investment. The country is focusing on sovereign-backed infrastructure to keep critical data under national jurisdiction. Partnerships with the US include strict safeguards to prevent misuse of AI technology. Nevertheless, the UAE balances dependency on foreign technology with efforts to grow sovereign AI capabilities.
Overall, UAE data center investment represents a strategic shift from oil to digital infrastructure. By combining capital, expertise, and governance, the country positions itself as a regional leader in AI while addressing energy, sustainability, and geopolitical challenges.
