Reports: Riyadh to be a major hub for data centers in the region over the next 3 years

A joint report by Jones Lang LaSalle (JLL) and Bloomberg revealed that Riyadh will strengthen its position as a major hub for data centers in the Middle East over the next three years, as part of the Kingdom’s efforts to enhance the digital transformation of its economy and consolidate its position as a regional center in the field of artificial intelligence.

JLL explained that Riyadh is about to increase its data center capacity, measured in megawatts, at a compound annual growth rate of 37% until 2027. This growth significantly exceeds the estimates of data centers in both Dubai and Abu Dhabi, and is much higher than the expected global rate of 15%.

In this context, Daniel Thorpe, Head of Data Center Research in Europe, the Middle East and Africa at JLL, stated: “We are witnessing a major shift towards digitization, which strengthens Saudi Arabia’s position as a major player in the artificial intelligence sector.” “In addition to favorable government policies, the data center market in the Kingdom is witnessing remarkable growth,” he added.

Saudi Arabia is seeking to modernize its cloud infrastructure and expand data centers as part of its efforts to become a regional hub for technology and innovation, with a focus on economic diversification. As these sectors expand, demand for data is increasing rapidly, with many companies opening new headquarters in Riyadh.

Among the companies contributing to this growth are Microsoft, Amazon.com in the cloud computing sector, Equinix, in addition to the cooperation of the American startup Groq with Aramco in developing an inference center for artificial intelligence. According to the JLL report, tax incentives, free economic zones, and efforts to enhance data sovereignty are key factors in attracting investments to this sector.

In a new move to support the artificial intelligence sector, the Kingdom intends to launch a project worth up to $100 billion, aiming to develop more data centers and enhance Saudi Arabia’s competitiveness in the face of similar initiatives in the UAE, according to Bloomberg.

Saudi Arabia’s plans face challenges, most notably restrictions imposed by the US government on the export of the latest AI chips, which are also facing restrictions in the UAE.

The Middle East’s data center market is currently worth around $6 billion, according to JLL estimates, with the UAE leading the way in capacity, followed by Saudi Arabia. But with a population approaching 35 million and a growing trend towards adopting AI technologies, Saudi Arabia has the opportunity to become a regional leader in this field, according to consulting firm The Proptech Connection.

For his part, Stephen MacDonald, managing partner at Proptech, said that “great determination” and “the ability to allocate resources” will help the kingdom overcome the challenges associated with high energy costs and the time required to develop data centers on a large scale. He added: “They have the ambition and the financial resources to be at the forefront of this sector.”