Iran rattles Gulf AI dreams

Politico

11 hours ago

With help from Aaron Mak
With American B-2 bombers pummeling Iran this weekend, and Iran attacking a U.S. base in Qatar Monday, the region is suddenly looking like an inhospitable place for U.S. tech companies planning enormous new data centers in the Gulf to power artificial intelligence.
For Saudi Arabia and the United Arab Emirates, the multi-billion-dollar deals announced in May during President Donald Trump's trip to the region are a vital step in their strategic plans to diversify their economies away from oil. For the American AI companies, these deals deepen connections with countries that are already major investors in U.S. data centers, and give the companies access to abundant, cheap energy.
But the past weekend's strikes on Iran, and Tehran's reprisal, underscore a possible downside: Once they're built, giant projects critical to the U.S. AI buildout could easily become targets for retaliation.
Those projects include plans by OpenAI, Nvidia, Cisco, Softbank and the Emirati G42 company to build a data center campus in the UAE with a capacity of 5 gigawatts — enough to power Miami. And the state-backed Saudi Arabian AI company Humain intends to buy at least 18,000 chips from Nvidia for building 'AI factories,' part of a landslide of tech deals including a $5 billion partnership with Amazon and a $10 billion collaboration with AMD.
Matt Pottinger, who served as a deputy national security adviser in the first Trump administration, said, 'The idea that we can build our largest data centers in the Middle East within easy drone and missile striking range of Iran and its proxies suggests to me that some people working for President Trump haven't done their homework. The joint U.S.-Israeli strikes on Iran's nuclear weapons program in recent days only reinforces this point.'
White House spokesperson Anna Kelly said Monday, 'The President is fully committed to these deals and looks forward to continued prosperous relations with our Gulf partners.'
To offset the increased cost of protecting AI infrastructure in the Gulf, Pottinger suggests that Congress demand American companies building data centers in the region contribute $3 billion a year to pay for their defense.
'The U.S. has spent $6 billion in the last two years on airstrikes, naval deployments and use of advanced munitions to defend against Iranian proxies attacking U.S. interests in the Gulf region,' Pottinger said, pointing to Iran-backed Houthi rebels attacking sites including U.S. ships in the Red Sea.
Three billion dollars would be small change for some of the largest tech companies; Nvidia had the world's second-highest market cap of $3.5 trillion on Monday. A spokesperson for the company declined to comment over the weekend. OpenAI, Cisco and Oracle did not respond to requests for comment.
Until this past week, critics of the AI deals focused on less kinetic concerns. Congressional Democrats, including Senate Intelligence Vice Chair Mark Warner (D-Va.) and Senate Armed Services ranking member Jeanne Shaheen (D-N.H.), pointed in a statement in mid-May to the risk of U.S. technology leaking to China or otherwise leaving American soil. They wrote, 'we could become as reliant on the Middle East for AI as we are on Taiwan for advanced semiconductors – and as we used to be on the Middle East for oil.'
Warner and Shaheen's offices did not reply to questions on the deals.
The House Select China Committee, chaired by Rep. John Moolenaar (R-Mich.), wrote on X in May that the data center plans 'present a vulnerability for the CCP to exploit.' Moolenaar did not reply to a request for comment over the weekend.
The White House, on the other hand, has defended the deals, even after Israel's airstrikes on Iran began on June 13. White House AI and crypto czar David Sacks told Bloomberg last week that the U.S. risked losing the tech race if it didn't expand to the Gulf: 'When we think about our goals here with respect to AI, we want the American tech stack to win. … We want to be the partner of choice in the world.'
At an energy forum held by the Atlantic Council in Washington last Tuesday, OpenAI's head of global affairs Chris Lehane told POLITICO the U.S. gains a strategic benefit by pulling the Gulf's economic powers into its orbit over China's.
In a speech to the same forum, Sultan Ahmed Al Jaber, CEO of the Abu Dhabi National Oil Company, called for restraint. 'The United Arab Emirates stands for dialogue, for de-escalation and diplomacy,' he said, before turning to his country's priority, AI: 'To realize the full power of AI, we must give it the power it needs,' he added.
Dania Thafer, a lecturer at Georgetown University and founder of the Washington-based Gulf International Forum, said Iranian attacks on U.S. installations in the UAE and Saudi Arabia could challenge their visions of becoming tech superpowers. 'This is why they have been working hard to de-escalate,' she said.
So far, it's not clear how far Iran will go in response to U.S. and Israeli strikes.
Iran reportedly warned Qatar ahead of Monday's strike, minimizing harm. But the disruption in the region is already immense. Air traffic is interrupted across the Gulf including over the UAE. Iran's parliament also reportedly endorsed closing the Strait of Hormuz that runs between the UAE and Iran and serves as a critical corridor for some 30 percent of the world's oil shipments.
Karen Young, a senior research scholar and Gulf specialist at Columbia University, said she was surprised Iran targeted an American base in Qatar, calling the nation Iran's 'best friend' in the region. The two also share the world's largest gas field. Even though it appears to be a symbolic strike — the Defense Department said there were no reports of U.S. casualties — the attack on Qatar could be an indicator of more to come that could undermine some core assumptions about the Gulf business climate.
Young said the global boom in AI sparked by the release of ChatGPT in late 2022 overlapped with a strategic shift among Gulf countries, led by UAE and Saudi Arabia. Those countries shifted away from regional rivalries and turned to diversifying their economies away from oil — and American industry was eager to partner in the process.
Conflict with Iran 'is the ultimate threat' to that shift, Young said.
'You start seeing the way Iran likes to fight wars — through hijackings, hostage taking, civilian attacks,' she said — tactics that undermine the idea of the Gulf as a stable and prosperous hub to the world. 'It doesn't work without foreigners, without technology partnerships,' she said.
State AI law moratorium survives
A spending bill provision preventing states from enforcing their AI laws for 10 years unexpectedly survived procedural objections in the Senate late Saturday, meaning it now needs to find enough Republican support to stay in the reconciliation process.
Many Republicans — and Democrats — widely expected the moratorium to be nixed by the Byrd rule, which prohibits provisions from being included in spending bills if they are extraneous to budgetary matters. However, Senate Republicans reached a compromise in early June meant to abide by the Byrd rule by conditioning state eligibility for federal broadband funding on compliance with the moratorium.
As POLITICO's Morning Tech team reports, child safety advocates are up in arms over the moratorium surviving the weekend. The provision has also generally faced pushback from state attorneys general, as well as Democrats and a handful of Republicans. In fact, Sen. Josh Hawley (R-Mo.) previously indicated he would work with Senate Democrats to introduce a floor amendment removing the provision. Rep. Marjorie Taylor Greene (R-Ga.) reiterated her opposition to the moratorium in an X post Monday, calling it a 'poison pill.'
The moratorium would prospectively impact every corner of the country, as all 50 states have either passed or introduced AI legislation to address deepfakes, data collection, copyright, and other issues.
Hollywood opposes bill on noisy streaming ads
Two major entertainment trade groups are opposing a proposal that would force streaming platforms to turn down the volume on ads.
The Motion Picture Association and Streaming Innovation Alliance — which together represent the likes of Disney, Amazon and Netflix — are urging California lawmakers to drop a bill that would prohibit streamed ads from being louder than the content they accompany. In a memo obtained by POLITICO's California Decoded team, the groups argue the requirement would particularly burden smaller platforms due to the technical costs associated with implementing audio controls. They also claim that streaming platforms are already looking into ways to voluntarily lower volumes.
Democratic state Sen. Tom Umberg introduced SB 576 in February after the senator's legislative director complained that unexpectedly loud streaming ads were waking up his daughter. Congress passed a federal law known as the CALM Act in 2010 to set volume standards for television ads, but it doesn't cover streaming platforms.
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Stay in touch with the whole team: Aaron Mak ([e-mail]); Mohar Chatterjee ([e-mail]); Steve Heuser ([e-mail]); Nate Robson ([e-mail]); and Daniella Cheslow ([e-mail]).