Oil-Dependent UAE Harnesses AI to Boost Economy

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Deep within the Abu Dhabi desert, a massive AI campus roughly a quarter the size of Paris is beginning to take shape, representing the UAE’s boldest venture yet into technology intended to reshape its economy. Tower cranes are heard clanking as long, low-rise buildings rise below—these will eventually house data centers powered by five gigawatts of electricity, making it the largest such facility outside of the United States.

This campus aims to deliver storage and processing power across a 3,200-kilometer (around 1,990 miles) radius, serving up to four billion people, stated Johan Nilerud, Chief Strategy Officer at Khazna Data Centers, a subsidiary of the Emirati AI titan G42 leading the project.

Since the 1960s, the UAE has transitioned from a desert outpost inhabited by nomadic tribes to a prominent Middle Eastern economic and diplomatic powerhouse, primarily fueled by oil. Now, the nation is betting that artificial intelligence will help bridge the gap as oil demand declines.

“Despite its small size, the UAE aims to be a global leader in AI,” Nilerud commented. “The goal is to attract international partners and develop into an AI-native nation.”

The first phase of the campus—G42’s Stargate UAE cluster, with a capacity of one gigawatt—will operate in partnership with OpenAI and will be supported by major US tech companies such as Oracle, Cisco, and Nvidia. Recently, Microsoft announced plans to invest over $15.2 billion in the UAE by 2029, following a $1.5 billion investment into G42 last year.

The UAE has been strongly committed to AI since 2017, appointing the world’s first AI minister and unveiling a national AI strategy, being only the second country after Canada to do so. A year later, G42 was founded with backing from Mubadala, Abu Dhabi’s sovereign wealth fund. Chaired by Sheikh Tahnoon bin Zayed Al Nahyan, brother of the UAE president, G42 now offers a range of AI products and employs over 23,000 people.

Since 2024, the UAE claims to have invested over $147 billion into AI initiatives, including a €50 billion (~$58 billion) project for a gigawatt AI data center in France.

“AI, like oil, is a cross-sector technology with the potential for widespread impact,” explained Professor Jean-Francois Gagne of the University of Montreal. In 2019, Abu Dhabi launched the Mohamed bin Zayed University of Artificial Intelligence—the first university dedicated solely to AI—and last August, AI became a core subject in public schools across all grade levels.

The country’s efforts include launching generative AI models like Falcon through its institutions, which compare favorably with industry leaders and now feature Arabic language versions. To reduce dependence on imported hardware and expertise, the UAE is heavily investing in local research, development, and domestic programs.

TII, Abu Dhabi’s Technology Innovation Institute, has partnered with Nvidia on research to advance generative AI and robotics, according to Executive Director Najwa Aaraj. “Sovereignty, self-sufficiency, and customizing technology to meet local needs are critical,” said MBZUAI President Eric Xing, emphasizing the importance of developing local expertise instead of relying solely on foreign imports.

In the race for AI dominance, the UAE trails behind the US and China but leverages significant advantages—primarily access to cheap energy and substantial financial resources. With abundant oil, natural gas, and year-round sunlight for solar power, it can swiftly construct the necessary energy infrastructure for data centers—an obstacle many other regions face.

Furthermore, as a regional business hub with nearly 90% expatriate population, the UAE holds an edge. It carefully balances relations between the US and China to secure vital technological imports, including advanced chips crucial for AI data centers. Recently, the US approved the export of Nvidia’s cutting-edge chips to both the UAE and Saudi Arabia, a move that aligns with Dubai’s strategic aim to reduce reliance on China without depending entirely on US technology.

Despite progress and heavy investment, the path forward remains uncertain. Industry experts note that the AI sector is unpredictable, with winners and losers yet to be determined. “Right now, we don’t have a clear strategy or understanding of who the top players will be,” Gagne observed. “Everyone’s betting on different players, and only some will succeed.”