Iran launched drone and missile strikes against Amazon Web Services data centers in the United Arab Emirates and Bahrain in early May 2026. The attacks damaged infrastructure and forced repairs that are expected to take several months. Iran also threatened to strike the Stargate AI infrastructure project in Abu Dhabi, raising concerns about the stability of the region’s technology sector.
Analysts predict shift to Asia for AI data center expansion
The Middle East had previously been ranked as the third and fourth most attractive places for data center development, trailing only Virginia and Texas. Analysts at Morgan Stanley noted that the region was a prime candidate for expansion before the conflict due to its readily available power supply, capital for development, domestic regulatory push, and strong political ties to the US.
Despite the direct impact on at least one data center hit by a drone, industry observers report no slowdown in activity. Mark Whyte from Control Risks stated that the volumes of work are actually increasing. Hyperscalers are now considering diverting AI data center projects from the Middle East to Southeast Asia, Japan, and Australia to mitigate geopolitical risks.
Mayank Maheshwari, an equity analyst at Morgan Stanley, predicts that Asia’s AI data center expansion will get even stronger in the coming years. He suggests that hyperscalers will redirect their investments toward Asian markets as a direct response to the security concerns in the Middle East. This shift aims to secure supply chains while maintaining the momentum of AI infrastructure buildouts.
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