The Revere

By Bruce Ru

With a resource-rich geography and earnest political will, Saudi Arabia seems poised to become a major global data center hub. However, its leaders must couple a skillful foreign policy with sustainable solutions to secure the kingdom’s long-term edge in the AI race.

In 1938, the Standard Oil Company of California (SOCAL) discovered oil near Dammam, Saudi Arabia. Overnight, the barren desert, known in Arabic as Rub al Khali, or empty quarter, became a lucrative energy source for an industrializing world. Almost 90 years later, the kingdom discovered another treasure in its parched landscape — the potential to host the world’s cheapest AI data centers, thanks to its high energy supply and low population density, to attract the world’s largest tech companies. 

The push for data centers is part of Saudi Arabia’s Vision 2030, a larger movement to diversify its economy beyond oil. Though most associate Vision 2030 with ambitious tourist projects like NEOM and Qiddiya, the AI industry is equally important to the transition toward a data-driven economy. The process began in 2019 when a royal decree established the Saudi Authority of Data & AI (SDAIA) to manage the kingdom’s data and AI agenda. The strategy accelerated in May 2025 when Crown Prince Mohammad bin Salman (MBS), Saudi Arabia’s de facto ruler, launched and appointed himself chairman of Humain, a government-backed AI company that has since developed an Arabic chatbot, identified 200 potential data center sites, and secured 18,000 cutting-edge NVIDIA chips from the U.S. Moreover, data centers under construction include a 500-megawatt facility for Elon Musk’s xAI, another for the chipmaker Groq, and the world’s largest government data center in Riyadh. With a resource-rich geography and earnest political will, Saudi Arabia seems poised to become a major global data center hub. However, its leaders must couple a skillful foreign policy with sustainable solutions to secure the kingdom’s long-term edge in the AI race.

Saudi Arabia’s primary advantage in the data center industry is its ability to provide low-cost computing power due to the availability of cheap domestic electricity. Saudi Arabia’s oil and natural gas reserves (second and sixth largest in the world, respectively) allow it to produce some of the cheapest electricity at $0.056 for households and $0.069 for businesses, averaged between 2023-25. Tareq Amin, Humain’s CEO, estimates that using local electricity, Saudi data centers will charge customers at half the usual market price while still turning a profit. Also, with a population density as low as 15 people per square kilometer, Saudi Arabia can easily accommodate sprawling data facilities, a significant comparative advantage against other data center hubs like the Netherlands or Singapore. As a result, most current data centers are located in the desert areas surrounding Riyadh, the capital, and Dammam, a major city close to the Eastern oilfields. These natural blessings give the kingdom a head start in the data center race.

A strong political will, supported by economic prosperity, will also calibrate the kingdom’s AI transformation. Led by a crown prince determined to have a tech revolution and the ultimate success of Vision 2030 as his legacy, the Saudi government is ready to abortion much of its $360 billion national budget to get the data center industry up and running. By funding research & development, attracting human resources, and creating innovative solutions, they may turn the nation into a global AI Hub in less than a decade. Meanwhile, as a centralized economy with a government-backed energy policy, Saudi Arabia can also bypass lengthy permitting and litigation processes common in democratic countries, allowing it to construct infrastructure quickly. Government support like tax incentives, reduced electricity rates, as well as the opportunity to tap into the Saudi Public Investment Fund will further boost data center development. Thus, with a fortuitous mix of geographical advantages and government determination, the Saudi data center industry seems destined to succeed. 

However, a talent gap, the U.S.-China rivalry, and regional competition may derail the kingdom’s ambitions. Saudi Arabia’s data center development remains at an early stage, meaning it lacks the talent found in more established hubs like the U.S. and China. In fact, the tech education program Nucamp reported a 20% talent gap in the kingdom’s tech sector, which relies mostly on foreign hires rather than local employees. Also, Saudi data centers, which rely on U.S. chips to operate, may suffer from a chokehold due to the country’s ties to China. U.S. export controls have sought to prevent the most advanced chips from reaching China to prevent it from developing high-tech capabilities. As a result, Saudi Arabia’s ties to Beijing, including its $50 billion annual oil trade, construction contracts valuing $32 billion in 2024, and Saudi Aramco’s use of DeepSeek AI, may dissuade Washington from approving more semiconductor purchases. In the meantime, neighboring UAE has already emerged as a competitor. Thanks to its allied relationship with the U.S., Abu Dhabi has access to the best chips in quantities Saudi leaders can only dream of. Corporations like Microsoft, Amazon Web Services, and Equinix already have data centers under construction there, such as Oracle’s Stargate UAE slated to open this year. Therefore, Saudi leaders must navigate these geopolitical challenges to avoid wasting their potential.

Furthermore, even if Saudi data centers please their initial investors, environmental and human rights concerns may detract from the kingdom’s long-term attractiveness. In the near future, most Saudi data centers will still run on fossil fuels, contributing to the industry’s carbon footprint accounting for 1-2% of the world’s electricity usage. With the largest facilities consuming millions of gallons daily to cool their servers, data centers strain water resources too. Saudi Arabia’s dry climate exacerbates this problem, and alternatives like underground cooling facilities that work in colder climates only offer a partial solution due to the desert’s scorching temperatures. Beyond environmental concerns, Saudi Arabia’s suppression of women’s rights, public beheadings, intervention in the Yemeni Civil War, and poor democracy indices may also deter businesses on ethical grounds and scare away talented expats, especially women. Recent events like the U.S. intervention in Venezuela may suggest that anything is justifiable for economic gain, but Saudi Arabia could not afford to reverse its past decade of social progress.

Therefore, though Saudi Arabia’s bid to modernize its economy begins with the right intention, its successful implementation will require leaders to rethink their playbook. As Vision 2030’s primary goal is to shift away from fossil fuels, environmental solutions are the first to come to mind. Aside from energy-saving measures, Riyadh must upgrade its renewable energy capacity through subsidies and fast-tracking permits. Further research on nuclear power may open yet another alternative. Meanwhile, to improve its trustworthiness for foreign companies, Saudi corporations should follow respected industry standards, such as the EU Code of Conduct for data centers, and embrace data sovereignty. The latter describes a model where a data center host follows the laws of the client’s home country, a crucial compromise to guarantee privacy and security for all parties. A cautious foreign policy that balances geopolitical tensions and regional competition will also enlist the support of the U.S. and other allies. Finally, continuing progressive social reforms all help the kingdom win global recognition and attract talent to achieve its goals.

The 1938 discovery of oil indeed brought to Saudi Arabia one of the greatest social and economic transformations in human history. In a few decades, the kingdom emerged from a war-torn, primarily nomadic tribal state to a prosperous regional power. In 2026, Saudi leaders have the opportunity to take another leap into the future. But instead of finding a non-renewable resource, this time, Saudi Arabia must strive to uncover a sustainable strategy to win in the age of AI.