Analysis
Tech

Gulf urged to add more to its data centre offerings

April 6, 2025, 2:06 PM

Gulf data centres will need to look beyond hydrocarbon fuel sources to renewables, experts say

GCC market worth $3.5bn in 2024
More focus on renewables needed
‘Great opportunity for the Gulf’

Data centres are big business across the Gulf. But experts say the industry faces some major challenges: developing value-added goods and services, increasing research and development funding and identifying the right energy mix to power them.

Sales in the GCC data centre market were worth nearly $3.5 billion last year, according to estimates by Research and Markets. This will almost treble before the end of the decade as the development of artificial intelligence demands more and more of this underlying physical infrastructure.

Data centres are energy intensive and accounted for about 1 percent of worldwide electricity consumption in 2024, International Energy Agency figures show. The energy-rich Gulf is an obvious place to locate them.

“Data centres are the low-hanging fruit, but already if you can repackage oil into compute capacity and sell it at a much better economic value, this is a great opportunity for the Gulf,” says Bashar Kilani, founder and managing director of advisory firm AI360 Innovations in Dubai.

The UAE is home to the Middle East and North Africa’s largest concentration of data centres but is nevertheless struggling to meet soaring demand and raise investments for the capital-intensive early phases of development. Saudi Arabia too is getting into the game.

Equinix, which has its headquarters in California, Gulf Data Hub and Khazna, both based in Dubai, Qatari telecom company Ooredoo and Bahrain’s Qareeb are among the names with well-established operations across the six GCC states – and more facilities in the pipeline.

As development progresses, the region must not limit itself to harnessing its abundant hydrocarbon resources to host centres and ultimately sell the data they produce, according to Ran Bi, the International Monetary Fund’s deputy division chief for the GCC.

That might fall short of “true diversification”, she cautioned during a virtual event last month hosted by the Arab Gulf States Institute in Washington DC, becoming just another name for energy exports.

According to Bi and other experts, the GCC must build a new ecosystem of higher-value digital services, from software development to cloud computing, and ensure the data centre industry becomes a catalyst for the transition to renewable energy.

Mohammed Soliman of McLarty Associates and the Middle East Institute in Washington, says Gulf states “are getting there” when it comes to adding a layer of sophisticated industries that can sit atop the data centres.

He cites companies such as AI developer G42, tech-focused investor MGX and Mubadala-owned chip maker GlobalFoundries as evidence of that – although GlobalFoundries has not been without its issues.

Kilani is similarly confident that the UAE in particular has already built state-of-the-art physical and regulatory infrastructure for AI, and is well on its way to develop or attract the necessary talent.

Take, for instance, the large language model from Abu Dhabi’s Falcon, or its Arabic equivalent Jais, which came out of a collaboration between G42’s subsidiary Inception and the Mohamed bin Zayed University of Artificial Intelligence.

To get the most of data centres, there is one domain in which the UAE and larger GCC needs to press the accelerator and that is research and development investment, Kilani says.

“R&D is definitely a big challenge in this part of the world,” he says. “If the Gulf and the Middle East want to become a successful tech hub, they must have talent and they must advance research, so this is an area that they’re working on.”

Soliman points out that the region must also ensure the data centres are increasingly powered by cleaner energy sources.

In February, Dubai inaugurated the world’s largest solar power data centre in the Mohammed bin Rashid Al Maktoum Solar Park.

“If data centres in the Gulf lean too heavily on cheap, hydrocarbon-based power without pivoting to renewables or efficiency innovations, it could limit their energy diversification impact,” Soliman says.