Microsoft (MSFT.US) is betting heavily on the Middle East! By 2030, it is planned to invest more than $10 billion to increase AI and cloud computing infrastructure, but geographical risk is the biggest variable

The Zhitong Finance App learned that Microsoft (MSFT.US) said on Wednesday that it plans to invest more than $10 billion in capital and operating expenses in the Middle East by 2030 to expand its cloud computing and artificial intelligence (AI) infrastructure in Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.

Microsoft said the investment will include expanding cloud computing and AI production capacity and cooperating with governments and local agencies to carry out AI projects. Microsoft also plans to invest more than $400 million in undersea and terrestrial connectivity infrastructure in the region by 2030. The company said these expenses will expand network capacity and provide alternative transmission routes for data traffic in the event of an outage.

Microsoft said its plans in the Middle East will initially focus on covering Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. The company will work with agencies such as Saudi Arabia's HUMAIN and SDAIA, Abu Dhabi's G42, Qatar's QAI, and the governments of Kuwait and the UAE. The company further stated that while expanding cloud computing and AI facilities, it will also work with local partners to build infrastructure that uses less water and expand access to carbon-free electricity.

In recent years, the Middle East region has attracted the attention of US tech giants with its strong capital, cheap energy, flexible regulation, and geographical advantages close to African and European markets. Companies such as Microsoft, Google (GOOGL.US), Amazon (AMZN.US), and OpenAI have poured in, leading to a boom in AI software development and infrastructure construction such as data centers.

US President Trump has also promoted cooperation between Silicon Valley and the Gulf countries. During Trump's visit to Saudi Arabia in May last year, HUMAIN, an AI company wholly owned by Saudi sovereign wealth fund PIF, reached cooperation with Nvidia (NVDA.US) and AMD (AMD.US) to invest up to 10 billion US dollars over the next five years to deploy 500 megawatts of AI hardware infrastructure.

According to data from market research firm IDC, the total spending of consumers and businesses on technology in the Middle East is estimated to have reached 65 billion US dollars last year, up from 36 billion US dollars in 2020. Among them, technology spending on data centers and cloud services increased 75% year over year to reach US$895 million.

However, as the geographical situation in the Middle East has not been peaceful in recent years, the investment of these tech giants in the region is at risk. After the US and Israel launched an attack on Iran at the end of February, the Islamic Revolutionary Guard Corps of Iran issued an announcement at the end of March, targeting 18 US information and communication technology and AI companies in the Middle East as “legitimate targets”, including Microsoft. Since the outbreak of the war between the US and Iran, several data centers in the Middle East have been affected. Amazon recently revealed that some data in some of the affected data center facilities in the UAE and Bahrain has not been recovered.

Some analysts pointed out that data centers are indeed becoming a new type of strategic target. In the past, military attacks often targeted oil and gas facilities, power plants, ports, and communication hubs because these are the “blood supply systems” of industrial society. In an age dominated by AI and cloud computing, computing power and data infrastructure are becoming the “nerve center” of the country's operation.

More importantly, data centers are often highly dependent on electricity, cooling, and backbone networks, and there is no need to completely destroy the entire facility. As long as power supply, cooling, or critical network nodes are interrupted for a long period of time, it may spill over to financial, logistics, government, and military systems.

In addition to security risks, tech giants are also likely to face supply chain disruptions, soaring gas prices for data centers, and rising costs for commodities such as plastics and aluminum necessary to manufacture electronic components. Xiaomeng Lu, director of the political risk consulting firm Eurasia Group, once said that this round of Middle East conflict will weaken the Gulf countries' efforts to attract tech giants, and “their ambitions need to be based on geopolitical stability.”