- Local Saudi Arabian specialists and telecommunications firms lack the expertise to handle the complex demands of hyperscalers, CEO says
- Khazna’s established expertise, financial backing, and strategic partnerships position it well to capitalise on this opportunity.
- Company’s current capacity of 263 megawatts and the additional 175 megawatts under construction underscore its commitment to meeting the growing demand for computing power worldwide.
The global surge in artificial intelligence (AI) is not merely a technological phenomenon but a catalyst reshaping economies, driving geopolitical competition, and sparking a frenzied race to secure the infrastructure necessary to power its insatiable demands.
In this context, the expansion plans of Khazna, a data centre developer based in the United Arab Emirates, into neighbouring Saudi Arabia are emblematic of a larger trend: the Middle East’s emergence as a critical battleground for data infrastructure, fueled by ambitious economic diversification strategies and the allure of abundant, relatively inexpensive energy.
Khazna’s bold ambition to capture at least 25 per cent of the Saudi Arabian market underscores the intensity of this competition and the strategic importance of data centres in the burgeoning AI era.
Crucial point of differentiation
Khazna’s confidence stems from its established position as the largest data centre operator in the Middle East and North Africa (MENA) region. Backed by the UAE’s sovereign wealth fund, Mubadala, and later integrated into the Microsoft-backed tech conglomerate G42, Khazna boasts significant experience and financial resources.
CEO Hassan Al Naqbi, speaking to Bloomberg News, said that local Saudi Arabian specialists and telecommunications firms lack the expertise to handle the complex demands of hyperscalers – the American cloud-computing giants like Amazon, Google, and Oracle – reveals a crucial point of differentiation.
Hyperscalers require sophisticated data centre infrastructure to support immense processing power, stringent security protocols, and seamless scalability.
Khazna believes it possesses the design, delivery, and operational capabilities to meet these demanding requirements, thus positioning itself as a prime partner for international tech titans seeking to establish a foothold in the Kingdom.
The motivations driving this regional data centre boom are multifaceted. Firstly, the UAE and Saudi Arabia are actively pursuing economic diversification strategies aimed at reducing their reliance on hydrocarbon revenues.
AI: A key enabler
AI is seen as a key enabler of this diversification, requiring significant investments in digital infrastructure, including data centres, to attract tech companies, foster innovation, and develop new industries.
Secondly, the availability of cheap energy and real estate in the Arabian Gulf makes the region an attractive destination for hyperscalers looking to expand their global footprint. The enormous energy demands of data centres necessitate access to affordable power, a resource abundant in the Gulf states.
Furthermore, Saudi Arabia’s recent mandate requiring personal and financial data to be stored within the country has created a compelling incentive for international companies to establish local data centre facilities. This policy, designed to ensure data sovereignty and national security, has triggered a wave of investment commitments.
Amazon’s pledge of $10 billion towards data centre development in Saudi Arabia, along with expansion plans from Google and Oracle, exemplifies this trend. These investments not only address regulatory requirements but also position these companies to capitalise on the Kingdom’s burgeoning digital economy.
Khazna: A force to reckon with
However, the landscape is not without its challenges. While the overall investment outlook for data centres in the MENA region is positive, as evidenced by Research and Markets’ projection of $12 billion in new investments by 2027, the market remains dynamic and subject to shifts in global technology trends.
The recent scaling back of some Microsoft data centre projects globally, serves as a cautionary tale, highlighting the potential for adjustments in investment strategies based on evolving market conditions and corporate priorities.
Moreover, the costs associated with building and operating data centres, particularly those designed to support AI applications, are substantial.
Abdullah Alswaha, Saudi Arabia’s Minister of Communications and Information Technology, estimates that the Kingdom is building upwards of two gigawatts of computing capacity, with costs ranging from $8 million to $12 million per megawatt, potentially reaching $30 million depending on the specific project and partner.
These figures underscore the significant financial commitment required to establish a leading position in the data centre market.
Khazna’s expansion plans extend beyond Saudi Arabia, encompassing locations in Turkey, Kenya, and Europe, demonstrating a broader strategic ambition to establish a global presence in the data centre sector.
The company’s current capacity of 263 megawatts and the additional 175 megawatts under construction underscore its commitment to meeting the growing demand for computing power worldwide.
Abu Dhabi expansion
Khazna has commenced construction on two new data centre facilities in Abu Dhabi, signifying a strategic expansion to meet the burgeoning demands of Artificial Intelligence (AI) workloads.
The AUH4 and AUH8 facilities, located in Mafraq and Masdar City respectively, will contribute a combined 60MW of capacity and are slated for completion in 2026.
This expansion, alongside the ongoing construction of the QAJ1 facility in Ajman, marks a significant investment in the UAE’s digital infrastructure.
The QAJ1 facility, distinguished as the region’s first AI-optimised data centre, boasts a planned 100MW capacity and further emphasizes Khazna’s commitment to supporting advanced digital services. The AUH4 and AUH8 projects, leveraging modular design architecture and adiabatic free cooling, demonstrate an emphasis on efficiency and sustainability in their construction and operation.
Finally, the geopolitical implications of the data centre arms race cannot be ignored. The US-China technology competition has cast a long shadow over the region, with concerns regarding the use of Chinese technology in critical infrastructure.
Microsoft’s $1.5 billion investment in G42, coupled with the Emirati company’s pledge to divest from Chinese technology holdings and remove Chinese-made equipment from its data centres, reflects a growing awareness of these geopolitical sensitivities.
The UAE’s current status on a list of countries facing restricted access to leading American-made AI chips further highlights the complex interplay between technology, security, and international relations. Khazna’s decision to phase out Huawei components reflects a calculated move to align itself with US interests and mitigate potential risks.