Boston Consulting Group (BCG) announced the launch of its new report, “AI Data Centers: An Opportunity in the Middle East”, during the sidelines of MWC Doha 2025, revealing that the Middle East is rapidly positioning the region as a rising global nexus for AI data center investment and innovation. As global demand for AI infrastructure accelerates, with data center power needs projected to grow from 86GW in 2025 to 198GW by 2030, BCG finds that the Middle East has a uniquely competitive advantage in supplying scalable, cost-efficient AI compute capacity.

Middle East: A Critical New Hub of AI Data Center Investment

BCG’s report highlights that the Middle East is not merely participating in the global AI infrastructure race; it is fast emerging as a critical new hub of AI data center development. The region benefits from distinctive structural advantages. Its strategic geography places it within a 2,000-mile radius of over 3 billion people, enabling it to serve Europe, Asia, Africa, and the Global South with non-latency-sensitive AI inferencing at scale.

David Panhans, Managing Director and Partner, BCG

Competitive cost structures, including up to 50% lower leasing rates, low power tariffs, and advanced cooling systems adopted by regional operators, significantly reduce the total cost of ownership. Meanwhile, markets such as the UAE and Saudi Arabia continue to accelerate time-to-market for new data centers through fast-track development, dedicated investment teams, and special economic zone clusters such as Masdar City’s Stargate Campus. This momentum is reinforced by the region’s expansive land availability, scalable power ecosystems, and the planned ~720 Tbps Fibre in the Gulf (FIG) submarine cable project.

Harold Haddad, Managing Director & Senior Partner BCG

Thibault Werlé, Managing Director and Partner at Boston Consulting Group (BCG), said: “The Middle East is undergoing a pivotal transformation as it positions itself to become a global hub for AI infrastructure. With strategic investments, progressive digital policies, and ambitious national visions across Qatar, the UAE, and Saudi Arabia, the region is building the foundation for scalable, next-generation AI compute. Qatar’s ongoing initiatives, showcased during MWC Doha, reflect the broader regional commitment to shaping a competitive and globally relevant AI ecosystem that can serve markets across Europe, Asia, Africa, and the Global South.”

Country Momentum Across the Region

The report outlines major national initiatives shaping the Middle East’s AI infrastructure landscape. Saudi Arabia has launched HUMAIN with a targeted 1.9GW AI data center capacity, along with partnerships with NVIDIA, AMD, AWS, DataVolt, and Groq to develop multi-hundred-megawatt AI campuses, including the world’s largest AI compute center. The UAE is advancing a 5GW AI campus in Abu Dhabi under the US-UAE AI Acceleration Partnership and is importing 500,000 GPUs for regional and US partners, supported by Microsoft’s USD $15.2 billion AI and cloud infrastructure investment. Qatar’s strategic investments complement these national efforts and reinforce a GCC-wide push toward establishing a global AI compute corridor.

Qatar Leading Regional Momentum

Qatar is steadily strengthening its position as a competitive player in the global AI and technology race, supported by strategic investments from the Qatar Investment Authority (QIA). These include the establishment of a USD $3 billion global platform with Blue Owl Capital to accelerate international AI and cloud infrastructure expansion, as well as QIA’s participation in Anthropic’s USD $13 billion funding round. These initiatives underscore Qatar’s commitment to advancing its digital capabilities and align closely with the ambitions of the Qatar Digital Vision 2030.

MWC Doha serves as a testament to the country’s growing role in shaping the regional technology landscape, reflecting Qatar’s intent to contribute meaningfully to the Middle East’s emerging AI infrastructure ecosystem.

Reflecting on BCG’s participation at MWC Doha, Harold Haddad, Managing Director and Senior Partner noted: “Qatar’s digital ambition is rapidly taking shape, driven by decisive leadership and a deep commitment to innovation. In line with Qatar National Vision 2030 and Qatar’s Third National Development Strategy, the country is harnessing AI and emerging technologies to cement its role as a competitive force in the global digital economy. Hosting Mobile World Congress Doha reflects this momentum and Qatar’s growing influence as a pivotal hub for technological advancement. At BCG, we are proud to contribute to this journey, partnering across sectors to help build the digital foundations of the future economy.”

Recommendations for Middle Eastern Governments

To fully unlock the region’s potential, BCG recommends that governments create streamlined, unified investment packages that integrate key inputs such as land, power, water, and connectivity within clear, time-bound frameworks. Expanding a diverse ecosystem of business and financing models including hyperscalers, GPU-as-a-Service providers, equity platforms, and bond-backed investments will be critical to enabling flexibility for market entrants. The report also emphasizes the importance of strengthening partnerships across chipset suppliers, research institutions, and component manufacturers to accelerate innovation across the AI data center value chain. Developing and retaining world-class digital and AI talent remains a central requirement for long-term competitiveness, capacity building, and sustained innovation.

As AI continues to reshape economic landscapes, data centers form the critical backbone of global technological leadership. With its strategic geography, favorable economics, and ambitious national digital agendas, the Middle East is uniquely poised to emerge as a global AI data center powerhouse—particularly for regions requiring scalable and cost-efficient AI compute such as the Global South.

NEOM, Masdar City and Dubai, cities that have long been a symbol of wealth and ambition, are not just building new skylines, they’re attempting to redefine what a city can be. With construction sector being one of the largest contributors to global emission, Middle East, flush with capital, ambitious projects, and new masterplans is testing a simple hypothesis: Can the region radically lower the carbon and resource footprint of entire cities through sustainable materials and Artificial Intelligence (AI)?

Governments and developers, in the Gulf, are shifting policies and procurement practices toward low-embodied-carbon alternatives: recycled aggregates, low-carbon concrete, engineered timber, high-performance insulation and off-site modular systems that dramatically cut waste. According to Grand View Research, in 2024, the global green building materials market was estimated to be worth hundreds of billions of dollars, and it is forecast to grow. Moreover, the GCC green building materials market alone reached an estimated USD 10.6 billion in 2024 and, according to an IMARC Group report, is expected to grow significantly as demand for sustainable inputs scales up.

NEOM’s energy and utilities arm, Enowa, explicitly emphasises circular systems and positions the project as a 100%renewables-powered ecosystem that integrates water, energy and industrial systems from the outset. It combines Industry 4.0 technologies with circular economy principles that force the choice of materials toward those that can be reused or easily recycled, while promoting off-site fabrication techniques that shrink construction waste.

For more than a decade, Masdar City has been offering a working prototype of what happens when sustainable material choices meet a systems approach, translating low-carbon urban design into practice. It pairs demonstrable clean energy capacity with district cooling systems, solar generation, and energy-efficient building envelopes with planning that reduces transport demand. Masdar’s broader organisation, its parent group, has also been scaling fast. Its report highlighted growth in clean energy capacity and an organisational push into integrated, low-carbon urban projects. The Masdar model is a reminder that reliable renewable supply makes higher-embodied, energy-intensive solutions (for example, electric construction equipment charged by renewables).

But materials alone won’t be enough, this is where AI becomes a multiplier. AI tools now enable topology optimisation for material efficiency, predict and prevent waste by logistics algorithms (supply chain forecasting, demand matching). In operations, machine learning drives HVAC optimisation (manage buildings in real time, predictive maintenance). For projects on the scale of NEOM or Masdar, with thousands of buildings, millions of square meters and complex infrastructure, AI systems can turn millions of data points into continuous efficiency gains.  NEOM and related initiatives are already integrating AI for water, energy and materials planning, while Oxagon’s industrial model assumes broad adoption of automation and AI in production.

Dubai’s trajectory shows how regulation and market amplify these technological shifts and incentives accelerate adoption. Municipal green building regulations, alongside certifications such as LEED and local green building systems, have driven a rapid uptake of sustainable construction practices, pushing developers to pursue energy-efficient envelopes, reduced water use, and green materials. According to Dubai Municipality, the city’s policy environment, paired with developers’ appetite for premium assets that offer lower operating costs and resilience to climate risk, creates an ecosystem where sustainable materials and smart building systems are not only environmentally desirable but financially sensible.

The Grand View Research estimates show the Gulf’s green-building sector and related materials markets expanding rapidly, with market valued in the mid-to-high tens of billions of dollars and forecast to double-digit compound annual growth rates in the coming five years. That inflow of capital matters because sustainable materials often carry higher up-front cost but deliver lower lifecycle costs, while AI and automation substantially reduce construction and lifecycle operating overruns. In other words, together they improve the return profile for long-term investors.

Yet ambition collides with practical constraints. Supply chains for low-embodied materials must scale quickly; while those in the region remain sensitive to cost, logistics, and local standards. Skilled labour in advanced assembly and data-science expertise to drive AI systems are limited and must be cultivated. Governance questions are also pressing: who owns the data generated by smart urban systems, how is privacy protected, and how do we ensure that AI allocates resources such as water, energy and mobility fairly. These are governance design problems, solvable, if tackled deliberately.

There are three pragmatic approaches for solving them. First, governments and project sponsors can accelerate local manufacturing of green materials through incentives and public-private partnerships. Second, procurement rules should favour lifecycle carbon and circularity over the lowest upfront price; that shifts incentives toward durable, reusable materials and off-site fabrication. Third, data-governance frameworks must be established from the outset: transparent rules about ownership and enable third-party innovation without commercial capture.

If NEOM, Masdar City and Dubai’s new districts can scale these approaches, the payoff will be tangible: lower lifecycle emissions, less construction waste, healthier indoor environments, and long-term savings for investors and taxpayers. The Middle East can move beyond being a market for imported technology to becoming a global crucible for sustainable urban practices, provided policymakers, developers and technologists align incentives and share data and best practices.

NEOM, Masdar and Dubai’s new districts are more than national statements; they are testbeds whose lessons could reshape how cities are built globally. If they get it right, prioritising lifecycle outcomes, scaling green materials, and embedding AI from design to operations, Middle East will be measured not only in square metres and skylines, but in the tonnes of embodied carbon avoided and the megabytes of intelligence that keep cities efficient and humane. The world will, for once, be watching not only to admire, but to learn.

Dr. Mutasim Nour, Director of MSc Energy, School of Engineering and Physical Sciences, Heriot- Watt University Dubai 

The usage of green energy has soared in the Middle East in recent years, highlighting the region’s futuristic and sustainable approach to socio-economic growth. According to a report by Rystad Energy, by 2050 renewable energy sources, including hydro, solar, and wind are expected to constitute a staggering 70 percent of the region’s power generation mix – a massive jump from the five percent recorded at the end of 2023.  The UAE stands out in particular, ranking 10th globally in per capita solar capacity in 2023, with an impressive 708 watts per capita as per the World Future Energy Summit 2025 report. From a modest 12 MW in 2012 to an ambitious 6.1 GW in 2023, the UAE’s solar capacity has grown rapidly.  Saudi Arabia is also making significant progress in this domain, with over 17 major renewable projects producing 41.2 million MWh annually that are aimed at fulfilling nearly 66 percent of residential energy needs.

These diversification efforts are accelerators of economic development as well as environmental well-being. However, green energy relies on variables that often fluctuate such as temperature, season, and wind intensity. This makes balancing supply and demand a complicated task requiring innovative solutions. The most promising one has been found in Smart Grids, which are an upgraded version of the traditional power network. These grids use digital technologies to monitor, predict, and respond to energy demand in real time, and enable two-way interactions where consumers can also produce energy (through solar panels, for example) and feed it back into the system. Their components include an Advanced Metering Infrastructure (AMI), grid automation and control, energy storage, and demand response programs that help them deliver superior results.

Smart grids are more flexible, efficient, and reliable compared to traditional grids and have helped significantly strengthen the renewable energy infrastructure in the Middle East. Saudi Arabia, for instance, has been developing AI-powered smart grids to integrate renewable energy and modernise infrastructure as part of its Vision 2030 initiative.  It has already automated 32% of its electricity distribution network and installed more than 11 million smart meters to further meet its goal of achieving net-zero emissions by 2060.

The UAE has also emerged as a pioneer in renewable energy innovation. Under the UAE Energy Strategy 2050, the nation aims to triple its renewable energy contributions by 2030 and achieve a 50 percent clean energy mix by 2050, aided by a substantial investment of AED150-200 billion.   The Department of Energy in Abu Dhabi also recently announced the first legally binding clean and renewable energy target in the Middle East called the Clean Energy Strategic Target 2035. This regulatory framework dictates that 60 per cent of the emirate’s electricity will be generated from clean and renewable sources by 2035, and there will be up to 75 per cent reduction in carbon emissions per MWh produced by the electricity sector. Energy storage solutions to achieve this goal, due to which the Department of Energy has signed a Memorandum of Understanding with the State Grid Corporation of China to build a strong and highly efficient smart energy and power system.

 In Dubai, progress in green energy is being led by the Dubai Electricity and Water Authority (DEWA), which has executed a $1.9 billion smart-grid initiative to deliver high standards of reliability and energy management. The smart grid initiative has helped DEWA achieve some remarkable outcomes: in 2023, line losses in electricity transmission and distribution networks were reduced to 2 percent, compared to 6-7 percent in Europe and the US. Additionally, water network losses dropped to 4.6 percent, significantly lower than approximately 15 percent reported in North America.

Even as smart grids transform the energy landscape, there are challenges that hinder the ability to effectively scale them up. These include:

• Technical interoperability: Smart Grids run on a complex mix of sensors, meters, and communication devices that are often made by different manufacturers. Ensuring that all data between these components is compatible and integrated correctly is often a difficult feat.    
• Cybersecurity: The reliance on digital communications and internet-based technologies in Smart Grids bring a new set of challenges with them. There is increased vulnerability to cyber-attacks that can lead to power outages, data breaches, and even structural damage to grid infrastructure.
• Regulatory barriers: Current regulations and policies often need to be adapted for the dynamism of smart grids. A clear and streamlined framework makes adoption easier and attracts investments into this technology.
•  Consumer awareness: Consumers can be skeptical of the advantages a smart grid presents, especially due to data privacy concerns and doubts regarding wireless communication. Initiatives like community education and incentivisation can go a long way in increasing consumer acceptance and support.

Smart grids also depend on a high initial investment and regular infrastructure upgrades to function properly. To address these challenges, governments across the world must formulate a comprehensive strategy that outlines the investment, infrastructure, and education required for smart grid networks in their region. A streamlined approach and clear objectives can revolutionise green energy integration and help mitigate climate change. With smart grids, consumers are empowered to become a part of the energy ecosystem and foster a culture of conservation and sustainability.