In 2023, data centers saw the second-largest investment year in the past decade globally. According to a report by global law firm, Linklaters, investment in data centers reached USD 36 billion in the past year, with USD 22 billion invested in the first five months of 2024.
Data centers are typically owned and operated either by large companies, such as cloud vendors, banks, or telecommunications firms, for their own purposes, or by co-location companies. Investors are drawn to data centers due to their steady, utility-like cash flows and attractive risk-adjusted yields.
The GCC data center market alone is expected to reach over USD 7 billion in investments by 2029.
The Middle East Landscape
The Middle East is witnessing substantial growth in the data center sector, driven by increased internet access and digital adoption. According to Turner and Townsend, the region currently boasts USD 1.2 billion in active data center projects and a future pipeline of USD 433 million, making it one of the fastest-growing industries.
The GCC data center market is emerging as a global leader, with significant investments from both existing operators and new entrants. In 2023, the GCC accounted for over 30% of the total data center investments in the Middle East. The rise of advanced technologies like AI, 5G, and digitalization, along with expanding undersea cable connectivity and government initiatives, are driving market expansion.
The presence of global cloud providers such as AWS, Oracle, and Google Cloud further boosts data center investments. The UAE, with its robust fiber connectivity and high internet usage, is a significant hub, led by Dubai and Abu Dhabi.
The UAE also has the largest concentration of data centers in the Middle East and is now more open to foreign direct investment and M&A activity. An example of this was witnessed in early 2024 when the UAE and Kazakhstan signed an agreement to explore investment opportunities in data centers and artificial intelligence (AI).
From a telco perspective, du and e& Carrier & Wholesale are expanding their state-of-the-art facilities, thus, enhancing regional digital infrastructure. UAE-based Khazna also announced its plan to enter the Egypt market with Benya Group in May 2023 by building a USD 250 million state-of-the-art data center set to be Egypt’s first hyperscale data center.
In Saudi Arabia, stc's center3 is among the largest operators, with plans for significant data center development by 2025-2026. The country's strict data protection laws and smart city initiatives are further fueling demand. International players like Infobip are also entering the market, contributing to local economic growth and job creation.
Initiatives like New Kuwait 2035 and Digital Oman 2030 are contributing to data center growth across the MENA region. Iraq has also made strides with the inauguration of its National Data Center, and Jordan's Aqaba Digital Hub is expanding its capacity, improving data exchange efficiency.
Why is the Data Center Market Attractive to Investors?
As the demand for advanced data processing and storage solutions continues to grow, several key advancements in the data center market are poised to attract significant investor interest. These advancements cater to the evolving needs of modern businesses and technologies, making data centers a lucrative investment opportunity.
Edge Computing: Investors are interested in data centers that can support edge computing infrastructures because they reduce latency by processing data closer to the source, enhancing real-time data handling. This capability is critical for emerging technologies like IoT and autonomous vehicles, offering faster response times and improving overall performance, which can drive higher demand and revenue growth.
In line with this, Rosenberger has introduced Lyra, an intelligent micro data center solution for edge computing environments. Lyra consolidates essential infrastructure components like power distribution, cooling, UPS, backup systems, cabling, and environmental monitoring into a standardized cabinet.
AI and Machine Learning (ML) Integration: Investors are interested in data centers that integrate AI and machine learning because these technologies enhance operational efficiency, improve predictive maintenance, and optimize resource utilization. This leads to cost savings, increased reliability, and the ability to offer advanced analytics services, making the data centers more competitive and profitable.
Data center network technologies empower telcos to provide flexible and scalable services, harness the potential of edge computing and embrace AI and ML for network optimization, among other functions.
Renewable Energy Integration: Investors are interested in data centers powered by renewable energy because they reduce operational costs, meet growing regulatory and environmental standards, and appeal to socially conscious customers. This sustainability focus not only lowers energy expenses but also enhances the data center’s marketability and long-term viability, driving higher returns on investment (ROI).
Sustainable financing mobilizes capital for environmentally-beneficial projects—such as reducing greenhouse gas (GHG) emissions and promoting renewable energy—by facilitating partnerships with capital providers, innovators in data center infrastructure, and developers of solar and wind farms. This approach helps data center operators and investors align with global climate goals, fostering innovation, competitiveness, safety, and growth in the industry.
Investors' interest in data centers powered by renewable energy is reflected in several recent initiatives. Huawei and DEWA pioneered the largest solar-powered data center in the MEA region, while Moro Hub and Huawei are collaborating on a similar project. Additionally, MIS and Abunayyan Holding Group have signed an MoU to develop green data centers in Saudi Arabia.
Hybrid and Multi-Cloud Environments: Investors are interested in data centers that support hybrid and multi-cloud environments because they offer flexibility, scalability, and resilience. Businesses can optimize their IT infrastructure by seamlessly integrating private and public clouds, reducing dependency on a single provider, and ensuring better performance and cost-efficiency. This adaptability meets the diverse needs of modern enterprises, making such data centers highly attractive for investment.
For example, in May 2024, one of the most prominent national banks in the UAE selected HPE GreenLake, hosted in du’s hyper-connected and Tier III Certified data centers, to accelerate CBD’s hybrid cloud journey.
Security and Compliance: Investors are interested in data centers that prioritize robust cybersecurity measures and compliance with data protection regulations because they ensure the protection of sensitive data, minimize the risk of breaches, and avoid costly legal penalties. This focus on security and compliance builds trust with clients and enhances the data center’s reputation, leading to increased demand and a more stable investment.
Cisco's plan to establish an edge datacenter for cloud security in Saudi Arabia (KSA) aligns perfectly with the growing investor interest in data centers that prioritize robust cybersecurity measures and compliance with data protection regulations.
Infrastructure-Ready: Investors are interested in data centers prepared for the increased data processing demands of networks driven by faster data speeds, lower latency, and support for a massive number of connected devices. Data centers capable of handling these demands are positioned to benefit from the expected surge in data traffic and futuristic applications, leading to higher revenue potential and growth opportunities.
Rosenberger’s data center cabling solution leverages patented, unique PreCONNECT® Trunk connection technology, equipped with various MPO/MTP-LC, MPO/MTP-MPO/MTP modules and patch cords. This allows stakeholders to upgrade smoothly to 40G/100G/400G/800G systems.
Data Center Transformation in the AI Era
As AI continues to evolve and integrate into various sectors, the demand for data centers equipped to handle AI workloads is expected to surge. To meet this growing demand and attract investors, data centers must undergo significant transformations.
Data centers need to enhance their computational power. By incorporating high-performance computing (HPC) capabilities, including GPUs and specialized AI accelerators, they can efficiently process the complex algorithms that AI applications require. This increased computational power must be complemented by expanded storage solutions to accommodate the massive volumes of data generated and processed by AI.
The Dell’Oro Group highlighted that AI networks will drive the transition to higher speeds, with Ethernet remaining the foundation of most enterprise data center networks. Significant investments are being made in Ethernet as it rapidly evolves. By 2025, 800 Gbps is expected to dominate AI back-end network ports, just two years after its latest product introduction.
Improving network infrastructure is another crucial step. Upgrading to support high-speed data transfer and low-latency connections is essential for real-time AI processing. Scalability is equally important, as data centers must implement architectures that allow for the seamless expansion of resources to keep pace with growing AI demands.
Rosenberger’s MTP® connector interface, particularly the MTP® Pro connector, plays a pivotal role in supporting the rapid evolution of data centers, enabling them to harness the full potential of AI technology.
Energy efficiency is a significant concern given the substantial power requirements of AI workloads. Data centers can optimize energy consumption by adopting advanced cooling technologies and integrating renewable energy sources. Additionally, robust security measures are imperative to protect the sensitive data involved in AI applications. Strengthening cybersecurity and ensuring compliance with data protection regulations can mitigate risks and build trust with clients and stakeholders.
Furthermore, data centers can leverage AI-driven management for predictive maintenance, resource optimization, and enhanced operational efficiency. Utilizing AI within the data center itself showcases a commitment to cutting-edge technology and operational excellence, further attracting investors.
Continue Reading:
Data Centers: Marking AI Dominance in the Middle East
Sofrecom's Insight: ICT's Carbon Footprint and Data Center Sustainability Efforts
The Dynamic Trio of Speed, Power, and Performance in Modern Data Centers
