Drone strikes on data centers force Big Tech to pause Middle East AI infrastructure projects

Drone strikes on data centers spook Big Tech, halting Middle East projects

A data center developer has paused all Middle East project investments after one of its facilities was damaged by an Iranian missile or drone attack. The decision comes as the Iran war is forcing Silicon Valley investors and tech companies to rethink a trillion-dollar plan to build more AI and cloud data centers in Gulf countries. The damaged data center is owned by Pure Data Centre Group, a London-based company that is operating or developing more than 1 gigawatt of data center capacity across Europe, the Middle East, and Asia. "No one's going to run into a burning building, so to speak," Pure DC CEO Gary Wojtaszek told CNBC. "No one's going to put in new additional capital at scale to do anything until everything settles down." Data center developers are already eating the costs of uninsurable war damage from the conflict, which began with a US-Israeli attack on Iran on February 28. Iran primarily responded by attacking shipping to shut down the Strait of Hormuz trade corridor along with striking US military bases and energy infrastructure across the Gulf region. Iran also directly struck two Amazon Web Services (AWS) data centers in the United Arab Emirates, while a near-miss from an Iranian one-way attack drone damaged a third AWS data center in Bahrain. The Iranian attacks caused structural damage, disrupted power delivery, and also triggered fire suppression systems that caused water damage, AWS reported through its service dashboard on March 1. That led to widespread disruptions in cloud services for AWS customers like banks, payment platforms, the Dubai-based ride-hailing app Careem, and the data cloud provider Snowflake. Crucially for Amazon's bottom line, the company chose to waive customer charges in its Middle East cloud region for the entire month of March 2026, as reported by The Register. That decision cost Amazon an estimated $150 million -- not including the damaged data centers -- because existing civil law frameworks put the financial burden on data center operators to absorb costs and refund clients in the event of military conflicts, according to Tech Policy Press. Meanwhile, Pure DC's data center campus on Abu Dhabi's Yas Island in the United Arab Emirates was supposedly hit by shrapnel, implying a near-miss rather than a direct hit. The 16-acre site already has 20 megawatts of data center capacity operational in service of an unnamed hyperscale customer, with the facilities being designed to support AI and cloud deployments. The company has not disclosed when the event happened or any potential data center disruptions and costs resulting from the incident. Big Tech in the crosshairs It has been clear for a while that tech companies cannot pretend to be mere bystanders in the ongoing conflict. Iran's Revolutionary Guard Corps directly threatened retaliation against US companies that it identified as having Israeli links and supporting military tech applications after an Iranian bank's data center was hit by a US or Israeli strike on March 11. The Iranian military organization released a list of "Iran's new targets" that included offices and data centers operated by Google, Microsoft, Palantir, IBM, Nvidia, and Oracle, and it reiterated a similar threat against tech companies on March 31 in retaliation for Israeli and US military strikes that resulted in the assassination of Iranian leaders. The Revolutionary Guard attempted to make good on that threat by attacking an Oracle data center in Dubai, United Arab Emirates, on April 2, according to Data Center Dynamics. Although the Dubai Media Office initially dismissed the claim, it later confirmed that shrapnel had fallen on the facade of the Oracle facility after a "successful aerial interception" by local air defense systems. Such incidents are forcing tech companies to rethink how they operate in the Middle East and other regions where military conflict is a risk, according to tech publication Rest of World. Possibilities include downsizing from massive data center campuses to smaller facilities distributed more widely, which would increase operational costs. Forbes reported that defense companies are seeing more interest in securing data centers with anti-drone and air-defense systems. Silicon Valley investors and Gulf countries like Saudi Arabia and the United Arab Emirates may also need to rethink plans for making the Middle East into a hub for AI data centers alongside the United States and China, Rest of World reported. US tech companies have each announced plans for data center developments worth billions of dollars, while certain Gulf countries have each pledged hundreds of billions of dollars for investment in AI chips and data centers. But for now, data center developer Pure DC still sees the Middle East as a "long-term opportunity" despite the temporary investment pause, according to CEO Gary Wojtaszek in his CNBC interview. On April 27, the company announced it had "recommitted its focus on the Middle East" after securing approval from a United Arab Emirates utility company to expand data center capacity at the facility that was damaged by shrapnel.

Major data center company pauses investment decisions in Middle East amid Iran war, CEO tells CNBC

Pure DC still considers the Middle East a commercial priority and a "long-term opportunity," Wojtaszek said. A major data center company has paused investment in AI infrastructure projects and data centers in the Middle East amid the Iran war, its CEO has told CNBC. As oil prices have skyrocketed and supply chains have been heavily disrupted by conflict in the region, the future of huge digital infrastructure plans in the Middle East has become uncertain. Assets in the region have become military targets and shortages are predicted for key materials needed for the AI infrastructure buildout. A data center in Abu Dhabi, operated by Oaktree-owned Pure DC, was struck by shrapnel from an Iranian attack. The company's CEO, Gary Wojtaszek, told CNBC that investment decisions had been paused on "all data center opportunities. No one wants to develop new data centers and put new GPUs in until things get settled." "No one's going to run into a burning building, so to speak," he said in an interview on Tuesday. "No one's going to put in new additional capital at scale to do anything until everything settles down." The slowdown follows huge spending in the Middle East from governments, as well as hyperscalers and data center developers looking to take advantage of cheap electricity and land, as Gulf states positioned themselves as key players in the AI boom. Pure DC still sees "long-term opportunity" in the Middle East, Wojtaszek said, adding that longer-term "planning and discussions" around data center projects there have continued.