How Gulf Sovereign Investors Can Build The World's Most Efficient AI Hubs

(MENAFN- Khaleej Times)

It is no surprise that the rise in Artificial Intelligence (AI) workloads is driving a global boom in data centres. When consumers shop online, send messages via WhatsApp, stream a movie or video call, they are relying on data centres to complete these simple, every-day tasks. What they don't realise is the energy impact of these insatiable machines.

To put it into perspective, it is estimated that training large AI models like GPT-4 can consume over 1.7 million kilowatt-hours of electricity and a 1 megawatt data centre can use up to 25.5 million litres of water annually just for cooling. This is roughly the daily water consumption of nearly 300,000 people!

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So, it isn't surprising that the energy and water usage required to power these enormous facilities and operate at their optimum has possibly reached crisis levels.

What is worrying is that tech companies have been exploring setting up data centres in countries with vast energy resources and favourable regulation to support AI systems - but many of these nations are already at risk of severe water scarcity, including Mexio, Brazil and other countries in South America.

This is just the tip of the iceberg. Water scarcity isn't the only factor hindering the pace of the data centre boom; these enormous facilities are sensitive to other external factors. For instance, Liquefied Natural Gas (a sustainable alternative to power data centres) remains vulnerable to geopolitical volatility, particularly during times of conflict. Earthquakes and floods stemming from climate change could also adversely affect operations.

Even as some operators are investing in renewable and resilient technologies to sustain data centre expansion, there is growing pressure from regulators and local governments to embed sustainability across operations. There have been some innovations - from liquid cooling to AI-driven energy management - to reduce energy consumption and maximize value but they are expensive.

This is where Gulf Sovereign Wealth Funds (SWFs) are uniquely positioned to take the lead globally in strategic investments in energy-efficient AI infrastructure. Despite tech providers expressing hesitance to set up data centres in arid environments, new technologies have created fresh opportunities to build cleaner and greener in the region. By integrating sovereign-controlled energy, land, and capital into an end-to-end model, the Middle East is primed to lead the data centre revolution.

Because Sovereign Wealth Funds can play a vital role in shaping national energy strategies, they can co-locate green power with hyperscale compute and design sustainable AI infrastructure from the ground up. Both Saudi Vision 2030 and the UAE's National AI Strategy 2031 have the potential to drive investments in cloud infrastructure and smart AI systems that support digital government services, as well as consumer apps.

Earlier this year, the UAE signed a multi-billion-dollar deal with the US to build a comprehensive data centre hub. Saudi Arabia has also set an ambitious goal of building up to 1.5 gigawatts of data center capacity by 2030, making it one of the largest planned data centre hubs in the region. Both the UAE and Saudi Arabia are well-placed to invest in R&D, challenging conventional approaches to running data centres, thanks to their capital and innovation capabilities.

For instance, a hydrogen-powered data center generates less harmful emissions and is more cost-effective to build than conventional methods. Underground data centres are also an alternative to overground facilities in hot and arid conditions. Of course, these solutions require further investment and pilots before they can be deployed at scale, capabilities that both the UAE and Saudi Arabia possess.

The region is already on the right track with its sovereign-backed specialized industrial zones and incubators, both of which are driving economic diversification and digital transformation. There is also a robust investment roadmap - from AI chips to strategic investments to build corridors for subsea cables.

By investing for the long term rather than chasing short-term returns, Gulf governments can steadily expand their hardware capacity and compete with global players. A robust regional model for AI-native infrastructure, powered by solar, nuclear, and hydrogen energy, can strengthen resilience. Clear carbon-intensity benchmarks with water-efficiency metrics will further reinforce this framework. Together, these elements will help the region navigate the data-centre surge, meet rising local demand, and support sustained international growth. Through strengthening the foundations of their AI governance structures and aligning them with national priorities, the Gulf countries can set the tempo of the AI age.

The writer is Partner, Sovereign Wealth Funds, KPMG Middle East LLP.

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