Security premium of up to 7 percent sees AI companies swallowing risk costs to expand in the Gulf
American AI and cloud computing companies are pushing to expand their presence in the Gulf region, a practical indicator that global firms are not backing down despite rising risks targeting digital infrastructure. Although geopolitical tensions and the Iran war have created a complex security environment that makes building tech facilities more costly and hazardous, investment appetite continues to absorb these additional costs to meet the region's growing demand for infrastructure and intelligent systems.
Regarding data centers, reports from The National newspaper revealed that Oracle plans to build additional data centers in Saudi Arabia and the United Arab Emirates to meet the growing demand for cloud capacity. This coincided with the launch of Scale AI, a company 49% owned by Meta that specializes in selling labeled data for model training, which established a headquarters in the Dubai International Financial Centre following the signing of an agreement with a unit of the G42 group to develop artificial intelligence agents.
In the same vein, Snowflake, listed on the New York Stock Exchange and led by former Google Ads chief Sridhar Ramaswamy, expects to invest $300 million in Saudi Arabia by 2030. The company's Saudi client list includes Almarai and Red Sea International, which is backed by the Public Investment Fund. Snowflake plans to launch two additional cloud computing regions, alongside a joint initiative with the Ministry of Communications to train thousands of Saudis in artificial intelligence skills.
However, this expansion faces a cautious economic assessment; Bloomberg economist Ziad Dawood believes that building data centers has only had a modest impact on Gulf economies.Dawood explained that the war's repercussions increase the cost of constructing this infrastructure, noting that stringent security hardening adds between 5 % and 7 % to total construction expenses. Nonetheless, the facts confirm a clear willingness among international companies to absorb this financial premium to secure their market presence.
We observe in the magazine that this expansion reshapes the on-ground reality for organizations and engineering teams in the Gulf, Egypt, and the Levant on two main levels. The first level involves localizing cloud infrastructure; the presence of new compute centers for Oracle and Snowflake provides lower latency and compliance with local data-sovereignty standards, although providers bearing a security premium of up to 7 % could raise cloud service pricing margins for participating companies in the future. The second level concerns talent quality; Scale AI’s partnership with G42 shifts the focus from off-the-shelf applications to data-quality assurance and the development of specialized agents, requiring developers and engineers to acquire complex data-flow engineering skills.
The true return from computing workloads does not stop at the walls of data centers, but rather lies in how their infrastructure is leveraged within operational processes.With companies committing hundreds of millions and expanding training, the practical step required of technology leaders is to prepare digital transformation plans that handle sovereign data on local, fortified infrastructure, while accounting for the impact of protection costs on long-term hosting budgets.