Over the past few years, several Gulf nations in the Middle East have unveiled ambitious plans using Artificial Intelligence (AI), with financial investments, infrastructure developments and international collaborations becoming a focal point of many countries’ vision for the future.
Saudi Arabia is expected to see the most gains from these new AI developments, with a PWC report projecting that AI will account for 12.4% of the Kingdom’s GDP by 2030. The same report projects that AI is anticipated to account for nearly 14% of the UAE’s GDP as well as 8.2% of Bahrain, Kuwait, Oman and Qatar’s combined GDP by 2030.
The AI sector offers the Gulf, a region rich in oil, an opportunity to diversify their economies. While many economists already recognize that economic reliance on oil is unsustainable in the long term and seek other means for economic growth, oil still makes up approximately one-third of Gulf states’ total GDP.
Beyond diversification, AI can also increase efficiency in sectors such as finance, and healthcare, public services and smart city infrastructure. For example, the UAE is already beginning to apply AI in government sectors, including using AI sensors to monitor traffic, implementing facial recognition to track driver fatigue and integrating chatbots to improve customer service.
The United Arab Emirates and Saudi Arabia are the forefront AI leaders in the region and have made several advancements regarding AI investments. For instance, the UAE’s state-sponsored MGX AI investment firm, is involved in several major projects, including a $500 billion project known as Stargate. Stargate was officially announced in January 2025 by U.S. President Donald Trump, and is a major AI infrastructure initiative involving the collaboration of several major global tech companies such as OpenAI, Oracle and SoftBank. Moreover, the UAE has made notable advancements in its data centre ecosystem with Khazna Data Centers, a data centre operator originally owned by one of Abu Dhabi’s sovereign wealth funds. Recently, the company introduced a 100 MW AI facility in Ajman as well as future plans to install additional capacity.
Saudi Arabia, on the other hand, is currently the largest Gulf investor in AI. At LEAP 2025, an annual technology conference, the Saudi government unveiled AI projects worth $14.9 billion and also announced other related initiatives, including a $100 billion Transcendence AI Initiative, backed by the Public Investment Fund (PIF). Amazon Web Services has also made a $5.3 billion commitment to build new data centres in the country.
Nevertheless, these ambitious plans have to face a major obstacle: water. The Middle East is already the most water scarce region in the world, with minimal rainfall and extreme temperatures. Moreover, the Gulf Cooperation Council (GCC) countries produce about 40% of the world’s desalinated water, with over 400 desalination plants operating in the region. However, water desalination, which is powered primarily by natural gas, is heavily relied on for water needs in the Gulf. The World Bank estimates that water availability per capita is expected to be halved by 2050.
The lack of available water makes building data centres a major challenge, since these centres require vast amounts of water in order to cool their processor microchips as well as the buildings where microchips are housed. For instance, Google’s data centres in the U.S. alone used an estimated 12.7 billion litres of fresh water in 2021 to cool their servers.
This is a problem that is not getting better. As AI investment expands, so does the need for more water. By 2027, the water demand for AI data centres is estimated to reach between 4.2–6.4 billion cubic meters worldwide, which corresponds to more than four to six times Denmark’s annual water use. Gulf nations, with growing populations and increasing water demand, already face pressing water problems. Ambitious plans to expand AI infrastructure and build larger data centres only risk exacerbating this issue.
Is there yet a solution? Some facilities are piloting ideas, such as implementing closed-loop cooling systems for their data centres, which recycle wastewater. However, AI runs the risk of shifting rather than resolving the water crisis in the Middle East if such techniques are not widely adopted.