War in the Middle East & Rising Interest Rates Threaten the Funding for AI Build-Out

Ongoing conflicts in the Middle East, direct attacks on cloud infrastructure, and rising interest rates are combining to threaten the capital flows and debt financing underpinning the global AI build-out. AWS has acknowledged that some customer data was lost permanently after drone attacks on its facilities in Bahrain and the UAE, and those sites remain mostly offline; at the same time, sovereign and private capital from the Gulf continues to back AI players even as oil exports fall. Saudi Arabia this month pledged $15 billion in domestic AI investment, while Crusoe Energy raised nearly $4 billion in a single round at a $30.9 billion post‑money valuation. Major regional investors such as the UAE’s MGX remain active, holding large positions in Anthropic and stakes in OpenAI and xAI.

"Tech's over-reliance on Middle Eastern money... accounted for 25% of all the capital being invested in AI globally," warned Jack Selby, head of Peter Thiel’s family office, a stark assessment of concentration risk that many investors and founders are watching closely.

The immediate shocks are visible. Physical damage to data centers from regional hostilities has already caused permanent customer data loss at AWS in Bahrain and the UAE, calling attention to the vulnerability of critical infrastructure and the likely increase in costs to harden and defend facilities. At the same time, sovereign liquidity remains uneven: Qatar has reportedly scaled back allocations, while the UAE and Saudi Arabia are "charging ahead," continuing large public and private investments. Saudi Arabia's $15 billion domestic AI pledge coincides with heavier funding of national champion Humain and a pullback from non-tech projects such as NeoCity and the LIV golf tour.

Capital, debt and rising costs

Investors warn that even if Gulf sovereigns continue to deploy capital, other pressures are mounting. Rising interest rates will increase the cost of debt financing for hyperscalers and data-center expansion, and Apollo’s chief economist has flagged that hyperscaler debt is getting riskier and thus more expensive. That will affect not only balance sheets but the pace at which new compute capacity — the backbone of advanced AI systems — can be provisioned.

• Regional investor activity remains significant: MGX has large positions in Anthropic and stakes in OpenAI and xAI.
• Privately raised capital is still flowing: Crusoe Energy's near-$4 billion raise at a $30.9 billion valuation is one recent example.
• Physical risks are material: AWS reported permanent data loss after drone attacks on Bahrain and UAE facilities.

The geopolitical squeeze is feeding into a broader uncertainty premium across tech. Venture firms long reliant on Gulf limited partners could face tightening deployment if oil revenues and sovereign liquidity decline further. As Jack Selby’s comment underscores, a concentrated source of capital — estimated by some at as much as a quarter of AI funding — creates systemic exposure for the ecosystem.

Outlook

Near term, the AI funding ecosystem appears resilient: public and private valuations remain high and Gulf capital is still largely active. But the combination of sustained regional conflict, higher interest rates, and political turbulence over AI safety raises the odds of a meaningful slowdown in build‑out spending. Founders and investors will likely begin to price in higher costs for hardened infrastructure, more expensive debt, and a potential rebalancing of limited partner allocations — all while incumbents and new entrants race to deploy personal AI services and capture market share before liquidity conditions tighten.