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The Capacity Middle East 2025 conference was held in Dubai in early February. Attendees discussed the current state of the datacenter market in the Middle East and Africa and offered projections for its direction. There was a focus on the Gulf Cooperation Council (GCC), a political and economic alliance between Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman. Key themes that emerged from the event were AI, digital infrastructure and the evolving needs of hyperscale cloud providers. CME 2025 highlighted a shared goal to make use of the region's capabilities to drive innovation and growth.

Key topics addressed at the event included the potential for AI to change the dynamics of the datacenter market in the Middle East, the need for resilient digital infrastructure and the diversification of connectivity routes. Panelists emphasized that the Middle East is becoming an attractive destination for hyperscalers, with providers actively exploring new revenue streams from this sector. Panelists and presenters were of the impression that, over the next 18 months, a trend toward "hyper decentralization" — driven by the demands of AI, the availability of high-performance digital infrastructure and regulatory support — will result in the Gulf Cooperation Council region becoming a next-generation global hub for AI and digital transformation.

Discussions also highlighted the need for enhanced subsea connectivity, with investments being made to develop new routes. The importance of low-latency connectivity was also emphasized as a core element of the Middle East's digital evolution. To ensure optimal performance for AI applications, global regions are working to establish ultra-low-latency routes between datacenters and service providers.

State of the Middle East region

The area is attracting attention from hyperscalers, while enterprises are increasingly pursuing digital transformation initiatives. The overall impression that those attending and participating in the event had was that the growth of AI and cloud technologies presents a strong opportunity for the region and that partnerships would be crucial for unlocking true growth potential. However, challenges remain, particularly regarding the need for deregulation to foster a more competitive market. The discussions at the event pointed out that while significant investments are being made, the region has yet to fully transition from a telco-dominated industry to one that encourages carrier neutrality.

Additionally, panelists raised concerns about the supply chain for subsea cable infrastructure. Demand for subsea cables has surged, driven by the increasing need for cloud services and digital transformation projects. However, manufacturing capacity has struggled to keep pace with this demand. Panelists indicated that alternatives such as satellite technology should not be overlooked and cited the need for a strong supply chain that can quickly adjust to the sector's fast-changing demands.

Is the region set for AI?

Panelists discussing the Middle East's readiness for AI integration emphasized the region's significant potential and advantageous position to leverage competitively priced energy. Fully benefiting from the AI opportunity, however, will require more investment in terrestrial fiber and datacenter connectivity. Panelists highlighted the development taking place in Saudi Arabia, noting that the country aims to position itself to become the next big datacenter hub in the GCC region, with aspirations to capitalize on AI growth over the next five years.

Discussions held at the event highlighted the establishment of Saudi Arabia's Public Investment Fund, which is actively working to position the country as a hub for advanced technologies. The establishment of the Saudi Company for Artificial Intelligence also reflects a commitment to driving innovation within prioritized segments such as smart cities, energy and healthcare. But to fully capitalize on the AI opportunity, there must be increased cooperation between GCC markets. CME 2025 also highlighted the strong momentum in other Middle Eastern countries, with the UAE's capacity expected to triple, presenting opportunities in sovereign AI.

Connectivity

A key takeaway from this year's event was that datacenters will inevitably drive demand for improved connectivity. Panelists discussed what hyperscalers look for in site selection, emphasizing the importance of reliability, low power usage effectiveness and access to renewable energy. There was a sense among participants that greater openness and collaboration between independent service providers and governments are essential for growth. Panelists also argued that the establishment of government incentives for hyperscalers further supports this collaborative approach.

Sustainability

Sustainability emerged as a key theme at CME 2025, with panelists discussing various initiatives and environmental, social and governance plans. Discussions spotlighted the region's advances in integrating renewable energy sources, including solar, nuclear and wind power. Panelists said Dubai's solar park, which adds five gigawatts to the grid, illustrates a commitment to sustainable energy offerings.

Various panels also touched on the importance of operational efficiency in achieving sustainability goals. AI has the potential to play a key role in optimizing datacenter operations to enhance overall efficiency, which could result in reduced energy consumption. Panelists emphasized, however, that there is still a need to implement power purchase agreements in the Middle East to support renewable energy initiatives.

Moreover, the panelists noted that as datacenter demand increases, so too will the need for advanced cooling solutions. Efficient cooling was a key topic in discussions about operational optimization, which can lead to enhanced energy efficiency in datacenters, particularly those supporting AI workloads.

Summary

Overall, the Capacity Middle East 2025 event presented an optimistic forecast for digital advancements in the region. Through ongoing infrastructure investments and AI integration efforts, the Middle East will continue to dedicate substantial resources to its digital transformation.

To achieve its vision of becoming a global hub, though, the region will need joint efforts from telcos, hyperscalers and governments to address current obstacles and fully harness its capabilities. Conference participants emphasized the need for an inclusive strategy that integrates infrastructure development alongside regulatory support and talent acquisition..

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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