In 2019, Amazon built its first data center in the Persian Gulf in Bahrain. Three years later, it expanded to the United Arab Emirates. In 2024, it began more than $10 billion in new projects across Saudi Arabia.<\/p>\n
The moves helped Amazon stake a claim to one of the world\u2019s fastest growing regions, where deep-pocketed governments and investors wanted in on the digital economy and artificial intelligence race.<\/p>\n
\u201cWe look forward to helping drive innovation and talent development across the kingdom,\u201d Andy Jassy, Amazon\u2019s chief executive, said in a visit<\/a> to Saudi Arabia last year with President Trump and other tech executives. <\/p>\n But Mr. Jassy\u2019s plans were thrown into chaos on March 1 when Iranian drones damaged Amazon\u2019s data center in Bahrain and struck two others in the U.A.E. Many customers who relied on the data centers for computing power remain in limbo.<\/p>\n American tech companies are facing a new reality in the Persian Gulf two weeks into the U.S.-Israeli war against Iran<\/a>. The region \u2014 seen as a safe haven for investment, cheap energy and hands-off regulation \u2014 became a hub for building the data centers needed to create and deliver A.I. software. Google, Microsoft, OpenAI and other American firms flocked to the area<\/a> for its growing economies and its convenient online transmission links to Africa and Europe.<\/p>\n Across the Middle East, total spending on consumer and business technology reached an estimated $65 billion last year, up from $36 billion in 2020, according to the research firm IDC. Spending on technology for data centers and cloud services rose 75 percent last year to $895 million.<\/p>\n Yet as the war drags on, the tech giants\u2019 bets in the region look increasingly vulnerable.<\/p>\n This week, Iran threatened<\/a> wider attacks against \u201cenemy technology infrastructure\u201d belonging to seven U.S. tech firms \u2014 Amazon, Microsoft, Google, Palantir, Nvidia, I.B.M. and Oracle. On Thursday, Mojtaba Khamenei, Iran\u2019s new supreme leader, raised further concerns with a vague warning that the country would be \u201copening other fronts where the enemy has little experience.\u201d<\/p>\n Cheered on by President Trump, who helped broker deals<\/a> between American tech giants and Gulf nations, the tech companies have downplayed the geopolitical risks of putting critical infrastructure in one of the most combustible parts of the world. Now a strategy pushed by the Trump administration<\/a> as a key advantage in the A.I. race risks becoming a major liability because of a war the administration started.<\/p>\n In the past couple of weeks, the tech industry has learned lessons that oil producers and global banks have struggled to navigate for decades, with billions of dollars of A.I. investment thrown into question.<\/p>\n \u201cThe energy sector is much more experienced in dealing with traditional geopolitical risks than the tech sector,\u201d said Steffen Hertog, a professor at the London School of Economics and Political Science, who is an expert on the Gulf economies. \u201cMost non-energy investors in the Gulf underpriced risk before the current war, including U.S. tech companies.\u201d<\/p>\n After Amazon\u2019s data centers were damaged by Iranian drones, many businesses in the region lost access to their networks.<\/p>\n \u201cThey got knocked out,\u201d said Simon Williams, a former Amazon employee who is now an executive at the A.I. company Atelic AI in Dubai. \u201cWe lost all our access to our servers. It\u2019s had a major impact on our business.\u201d<\/p>\n Mr. Williams is optimistic the region will remain a hub for tech investment. Yet he has not had any luck reaching Amazon representatives to regain access to key materials stored on the company\u2019s cloud.<\/p>\n \u201cIt\u2019s been a black box,\u201d he said. \u201cThey didn\u2019t have the best disaster recovery system.\u201d<\/p>\n Amazon suggested customers in the Middle East move workloads to data centers in other regions. In a statement, the company said it was \u201cadjusting operations in response to the evolving situation, including temporary pauses where necessary.\u201d<\/p>\n Google said it was monitoring the situation and that \u201cour focus is on the safety and well-being of our employees in the region.\u201d Microsoft declined to comment.<\/p>\n Dave Komendat, Boeing\u2019s former top security officer, said data centers make attractive targets in a conflict because they are a new form of critical infrastructure. After Amazon\u2019s data centers were hit, companies will give greater consideration to security risks before building, he said.<\/p>\n \u201cThis is a low-frequency, high-impact event,\u201d said Mr. Komendat, now a partner at Corporate Security Advisors, a security consulting firm. \u201cIt may not happen again or it may happen 10 more times.\u201d<\/p>\n The issues illustrate the centrality of American tech giants to geopolitical clashes, pushing key tech capabilities into areas that could turn them into choke points.<\/p>\n Widening spillover effects of the Iran war are expected to hit the tech industry. That includes disrupted supply chains, soaring prices for natural gas needed to power data centers, and rising costs for commodities like plastic and aluminum that are essential for making electronic components.<\/p>\n \u201cThe real weapon is not the drone; it is the insurance cancellation, the rerouted tanker, and the investor who pauses,\u201d Strategy International, a research and policy think tank, said in a recent report.<\/p>\n Tech vulnerabilities are evident in other parts of the world. China controls<\/a> much of the world\u2019s hardware manufacturing. In Taiwan<\/a>, which China has threatened to take by force, one company, TSMC, produces the majority of the world\u2019s advanced microchips. And South Korean plants within artillery distance of North Korea turn out much of the world\u2019s memory chips.<\/p>\n Xiaomeng Lu, a director at Eurasia Group, a risk-management consultancy that studies the interaction of emerging technologies and geopolitics, said the Iran war will bruise the efforts of Gulf countries to lure major tech companies, particularly to the United Arab Emirates, which neighbors Iran. <\/p>\n \u201cTheir ambitions are built on the assumption of geopolitical stability,\u201d she said. <\/p>\n The magnitude of the war\u2019s ultimate impact may partly depend on how it is resolved. If the war ushers in new Iranian leadership that is less confrontational with the United States and Israel, it could bring more stability and investment, Ms. Lu said. But if the Iranian government is weakened but remains in power, it could create the risk of further disruptions and conflict in the years ahead.<\/p>\n \u201cTime frame is key,\u201d she said. \u201cIf the war wraps up within a month, people will forget about this. If it goes on for months and months we\u2019ll be in very different territory.\u201d<\/p>\n Karen Weise contributed reporting.<\/p>\n","protected":false},"excerpt":{"rendered":"In 2019, Amazon built its first data center in the Persian Gulf in Bahrain. 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