The GCC’s digital transformation is accelerating at an extraordinary pace. Saudi Arabia and the UAE, similarly to other governments, are investing billions to localise data processing, attract hyperscalers, and build resilient infrastructure to sustain an AI-driven economy. Yet amid this momentum, two often underestimated factors will quietly determine the success – or failure – of many data centre transactions: where data is allowed to live, and how reliably it can be powered.As someone who has spent decades navigating complex energy and infrastructure deals and has invested in several climate tech across emerging markets for over a decade, I see a convergence in the digital infrastructure space. The same type of questions that shaped renewable power projects – local content, risk allocation, country risk, and long-term reliability – are now resurfacing in the data centre ecosystem.

Why the GCC’s data centre moment matters

Data is now and will continue to be a national asset, aka the “new digital oil”. For Saudi Arabia, data localisation is central to Vision 2030’s diversification agenda. In the UAE, Abu Dhabi’s Digital Economy Strategy aims to double the sector’s contribution to GDP by 2031. Both governments view digital infrastructure as critical to their sovereignty and long-term competitiveness.

Global hyperscalers and regional operators are responding fast. The Kingdom’s recent data centre commitments exceed USD 18 billion, while the UAE continues to host global players who focus on positioning the Emirates as the epicentre of their regional hubs. However, behind these headline investments lies a more complex reality: how to build and operate at scale while staying compliant with evolving national data and energy policies.

In my experience, success in such fast-moving sectors mainly hinges on aligning three things: technology, capital, and regulation. In the energy world, projects have generally flourished when legal clarity has given investors sufficient confidence to commit capital for the long term. The same principle now applies to digital infrastructure.

Saudi Arabia: Localising Data, Localising Value

Saudi Arabia’s regulatory framework for data centres has matured rapidly. The National Cybersecurity Authority (NCA) and the Saudi Data & Artificial Intelligence Authority (SDAIA) have introduced data residency requirements that restrict the cross-border transfer of certain categories of data. For global cloud providers, this means building infrastructure that has to be located within the Kingdom, whether by setting it themselves in the Kingdom or by partnering with Saudi-based entities to ensure compliance.

For investors and developers, these rules are reshaping deal structures. We increasingly see joint ventures, build-operate-transfer models, and local SPVs that mirror patterns familiar from energy and industrial projects. From the government’s perspective, the objective is not simply compliance – it’s maximising localisation of value: ensuring that Saudi data, jobs, and technological capacity are developed within national borders.

From a legal and transactional perspective, this certainly introduces new complexities. Contractual terms must now foresee and address regulatory audits, data storage obligations, and cyber-resilience standards alongside the usual terms on commercial and financing conditions. My takeaway from decades in energy law is that proactive engagement with regulators – and from the regulatory perspective early clarity on licensing obligations – can cut months off a deal timeline and substantially de-risk capital deployment.

Abu Dhabi’s competitive advantage: regulation meets flexibility

Abu Dhabi has taken a slightly different approach from KSA – one that balances control with openness. The Abu Dhabi Global Market (ADGM) has positioned itself as a hub for regional data-driven ventures, offering a predictable common-law-based framework that appeals to international investors.

From a power perspective, the Abu Dhabi Department of Energy (DoE) and Masdar are encouraging renewable-linked data centres by integrating solar generation and clean energy certificates into their designs. This alignment of digital growth with sustainability objectives is a major differentiator. It provides institutional investors with the transparency they need regarding ESG compliance and long-term energy sourcing – two issues increasingly influencing deal valuations worldwide.

Abu Dhabi’s regulatory pragmatism – clear, yet adaptive – creates an environment where both global cloud operators and local start-ups can thrive. In many ways, it resembles the jurisdictional flexibility that helped early renewable energy projects take off quickly more than a decade ago.

The power equation

Data centres are only as resilient as the power that feeds them. In regions with extreme temperatures, the energy intensity of cooling systems can account for nearly half of operating costs. At the same time, both Saudi Arabia and the UAE have set ambitious targets to increase the share of renewables in their generation mix. Balancing reliability with sustainability is therefore the sector’s defining challenge.

Grid resilience and redundancy have become key due diligence items in every transaction. Investors are increasingly asking: What happens if renewable generation fluctuates? Can on-site battery storage or microgrids mitigate supply risk?

Drawing on lessons from green infrastructure finance, hybrid power purchase agreements (PPAs), and modular renewable systems combined with BESS are emerging as viable solutions. They combine the predictability of conventional energy with the environmental benefits of clean power. Similarly, water-efficient cooling technologies and waste-heat reuse systems are moving from “nice-to-have” to “deal-critical.”

Globally, enhanced geothermal systems (EGS) and ground-source cooling are gaining traction for powering and cooling data centres – with consistent baseload output and 40–50% reductions in cooling energy use. In the GCC, Saudi Arabia is piloting direct-use geothermal projects: KAUST has drilled test wells and partnered with TAQA Geothermal and EDF to target both power and district-scale cooling. Aramco has also committed $100M to geothermal R&D, aiming to reach 1 GW of capacity by 2030. The UAE’s Masdar City previously tested subsurface cooling via Reykjavik Geothermal–TAQA efforts. These initiatives lay the groundwork for future geothermal-powered data centres that can significantly lower both energy costs and carbon footprints in hot, water-scarce environments.

For investors evaluating GCC data centres, understanding the interdependence between power availability, cost, and carbon footprint is now as important as assessing location or connectivity. Reliable green energy isn’t just an ESG checkbox – it’s a competitive advantage.

Start-ups tackling grid and water constraints: Breaking into the GCC

One of the most promising developments I see is the rise of start-ups tackling the infrastructure bottlenecks that data centres face—particularly around cooling, grid management, and water reuse. While many of these innovations are being tested in markets such as India, Singapore, or southern Europe, the GCC represents an extraordinary opportunity for scale.

To enter the region successfully, start-ups need to think beyond technology. The key is partnership. Working with utilities, industrial zones, or sovereign-linked accelerators such as The Catalyst in Masdar City, or programmes associated with major Saudi universities can provide access to pilot sites and funding.

Having worked with and invested in early-stage climate-tech ventures in this region, I’ve seen that the GCC’s demand for practical, scalable sustainability solutions far exceeds its current supply. Start-ups solving grid congestion, water scarcity, or energy efficiency problems will find no shortage of partners – if they manage to work with the incumbents and can tailor their solutions to the region’s specific climate and policy environment.

PPPs and blended financing: Unlocking scalable infrastructure

The GCC’s data centre boom is capital-intensive, but the financing landscape is evolving. Traditional project finance is now being supplemented by public-private partnerships (PPPs) and blended financing models that combine sovereign wealth funds, development finance institutions, and private investors.

This blended approach mirrors what has worked in renewable energy and desalination: shared risk, long-term offtake contracts, and transparent governance. In Saudi Arabia, PPP frameworks are enabling co-investment in power and utility infrastructure that underpins data parks. In Abu Dhabi, government-backed green finance initiatives are offering credit enhancements and preferential terms for sustainable projects.

From a legal perspective, the quality of governance and risk allocation in these structures will determine bankability. Clear mechanisms for cost recovery, tariff adjustment, expert decision-making and dispute resolution are critical. For investors entering the region, understanding how PPP frameworks integrate with data residency and energy regulation is essential to structuring successful transactions.

The trend is unmistakable: digital infrastructure is moving from a pure private play to a collaborative ecosystem where public objectives and private capital converge.

What smart capital will do next

As the GCC builds digital capacity at record speed, capital is following. We’re witnessing the rise of sovereign–hyperscaler partnerships – PIF and STC in Saudi Arabia, or Mubadala’s alliances with global cloud providers in the UAE – alongside growing interest from infrastructure funds and family offices seeking sustainable returns.

The next frontier will likely be edge computing zones and distributed renewable clusters that bring processing closer to users while reducing grid stress. These models require sophisticated coordination between regulators, power providers, and technology investors- an area where experienced infrastructure professionals can add real value.

Smart capital will prioritise deals that integrate three lenses:

1. Regulatory foresight – anticipating how data and energy policies will evolve, and adaptability for compliance with regulatory requirements.
2. ESG integrity – aligning with both global reporting standards and local sustainability targets.
3. Collaborative governance – ensuring risk-sharing mechanisms and local partnerships are built in from day one.

Investors who adopt this mindset will not only capture attractive returns but also help define the region’s sustainable digital future.

The GCC’s journey toward data sovereignty and energy sustainability is redefining how digital infrastructure is financed, built, and governed. The intersection of law, technology, and climate responsibility is now the most strategic space in regional investment.

In my view, the winners in this new landscape will be those who approach it as a collaborative project – regulators offering clear rules, investors bringing long-term capital, and innovators delivering tangible sustainability gains.

I’ve seen this dynamic before in renewable energy: early movers who understood local regulation and built trust with public stakeholders became market shapers, not just participants. The same opportunity exists today in the digital infrastructure space.

For global investors, data operators, and start-ups alike, the message is clear: align with local priorities, design for sustainability, and think in decades, not quarters. The GCC is not just a growth market—it’s a testbed for how the world can reconcile digital ambition with environmental responsibility.

And that is a future worth investing in.

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