How The Iran War Is Reshaping Global AI Strategy

While headlines of the Iran war focus on U.S. hyperscalers under attack in the Middle East, Chinese AI companies like Huawei and Alibaba (BABA) also face growing infrastructure risk in the region and investors may be missing the broader implications.

Iran’s missile strikes on Amazon Web Services data centers in the UAE in early March sent shock waves through the tech sector. Concerns around the Iran conflict have added to pressure on Amazon (AMZN) stock this year.

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						Hundreds Of Billions In AI Investments Now Sit In A War Zone. What Happens Next?

Iranian drones have since twice targeted Amazon’s largest Middle East data center in Bahrain, with damage reported April 1 by the Financial Times, and a day later Iran’s Islamic Revolutionary Guard Corps struck an Oracle (ORCL) data center in Dubai, according to state media.

The focus has shifted from oil infrastructure to a new kind of target: data centers. But the emphasis on American companies overlooks a critical reality: Chinese firms operating in the Gulf still face real infrastructure risk, challenging the narrative that they’re somehow insulated from this conflict.

China’s Growing AI Footprint In The Gulf

Alibaba and Huawei are expanding aggressively across the region through cloud services, data centers and telecom infrastructure, tying a growing share of their future revenue to assets inside a potential conflict zone.

Alibaba has committed roughly $53 billion to AI infrastructure over the next three years, while its cloud unit, a key part of that push, grew 36% year over year. That scale of investment underscores how much capital is now tied up in systems increasingly exposed to geopolitical risk.

The Middle East hosts 283 data centers across 17 countries, according to consulting firm Kearney, highlighting just how much critical AI infrastructure now sits inside a potential conflict zone.

“When you’re attacking data centers, you’re not necessarily attacking core infrastructure in the same way as oil and gas. But you are attacking investor trust,” RIHLA research and advisory CEO Jesse Marks told Investor’s Business Daily. “You’re attacking the next 20 to 30 years of investment and development in the region.”

Iran War: Data Centers As Strategic Targets

Beijing’s ties in the region could reduce the risk to its infrastructure, but Marks said the picture is more complicated.

“On the GCC side, the Iranians are less inclined to hit Chinese infrastructure,” Marks said.

That said, the broader risk to Gulf-based infrastructure remains.

“There’s also been a lot of intentionality on the Iranian side regarding what they’re hitting,” Marks said.

So far, there’s no clear evidence Chinese data centers in the Gulf have been hit.

“I have not seen any evidence of it,” Marks said.

But that does not mean Chinese infrastructure is out of danger entirely, especially on the Iran side.

Marks said Chinese firms are deeply embedded in Iran’s telecom and technology sectors, adding it is more likely that their infrastructure there has been affected by strikes.

Chinese firms still face risk as escalation in the region threatens their infrastructure and future investment, even if they are not the primary targets.

Where AI Investment Goes Next

The concern goes beyond physical damage, as companies may start rethinking whether to build in the UAE at all, potentially shifting future AI investment elsewhere.

That question matters most in the UAE, which has marketed itself as a stable hub for global business and tech investment. If companies start to doubt that premise, the losses may be harder to measure. The bigger hit could come from capital that never shows up.

The Gulf sits at the center of the AI build-out, combining cheap energy, deep pools of capital and a strategic position linking Asia, Europe and Africa. Marks said the conflict is already pushing up costs across the AI supply chain, including key components like semiconductors.

The energy side is already under pressure. Roughly 20% of the world’s oil and liquefied natural gas flows through the Strait of Hormuz, and the conflict has pushed fuel prices higher. For data centers, which depend on stable, low-cost power, that adds another layer of risk that extends far beyond the region.

Long-Term Impact Of Iran War On Gulf’s AI Ambitions

For Chinese companies like Huawei and Alibaba, the Middle East is an increasingly important growth market for AI infrastructure, driven by cheap energy, state-backed capital and demand for sovereign cloud systems.

Alibaba has been expanding its cloud footprint in the Gulf, including through data centers in Dubai and regional partnerships. For Huawei, the stakes are also high, given its long-standing role in regional telecom infrastructure and its push to sell end-to-end AI systems.

The question for investors is whether this conflict represents a temporary disruption or a more permanent shift in how AI infrastructure gets deployed globally.

“Chinese companies are really good at looking at an ecosystem that has been impacted by conflict and saying, ‘How can we help rebuild or gain a foothold here?’” Marks said.

Gulf conflict risk is no longer just a U.S. tech story and is starting to affect where companies build.

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