Middle East sovereign wealth funds account for roughly a quarter of global AI investments committed over the next five years, and markets are dramatically underpricing the risk that an extended Iran conflict could redirect those capital flows toward domestic rebuilding, according to tech investor Jack Selby.
Market Context
The warning comes as tech and chip stocks have faced renewed pressure this week following a Wall Street Journal report about missed revenue targets at OpenAI. AI infrastructure companies including Oracle, Nvidia, and Cisco are deeply exposed to Middle East capital through OpenAI's UAE campus project, which aims to build out 5 gigawatts of capacity. Microsoft separately plans to invest $15 billion in the UAE by 2029.
Analysis
Selby, managing director of Peter Thiel's family office Thiel Capital, told CNBC that if countries like the UAE and Saudi Arabia begin canceling data center projects to redirect funds toward reconstruction efforts, the impact on AI markets could far exceed current market pricing. "I think markets have underappreciated how important the Middle East region is for capex spending as it relates to AI and AI infrastructure," Selby said. "If the Middle East starts taking some of these projects offline or canceling some of these projects, the impact on the market could be much, much, much larger than what they currently suggest."
Middle East funds have already begun invoking force majeure clauses to cancel shipping and business contracts, a sign that data center cancellations could follow. Selby estimates half of Middle East AI funding targets regional data centers while the other half supports worldwide projects and companies. OpenAI has reportedly been seeking $50 billion from major regional sovereign wealth funds earlier this year.
Beyond geopolitical risks, Selby compared current AI market dynamics to the dot-com bubble, arguing that the scale of potential wealth destruction in an AI bust would dwarf previous tech crashes. "The AI bubble, when it busts, will be at least one more zero, probably two and three more zeros than the dot-com bubble," he said. "That will be tens, if not hundreds of billions of dollars." The top hyperscalers are expected to spend more than $700 billion on AI infrastructure this year alone.
Key Numbers
- Middle East investors account for approximately 25% of global AI investments over the next five years
- OpenAI's UAE campus targets 5 gigawatts of capacity with partners Oracle, Nvidia, Cisco
- Microsoft has committed $15 billion in UAE investments through 2029
- Top hyperscalers expected to spend more than $700 billion on AI capex this year
- OpenAI reportedly seeking $50 billion from Middle East sovereign wealth funds
What to Watch
Monitor for any announcements of data center project delays or cancellations by Middle East sovereign entities. Track force majeure contract invocations as a leading indicator of capital reallocation. Key levels to watch include semiconductor stocks tied to data center buildouts and hyperscaler capex guidance in upcoming earnings reports. The trajectory of Iran conflict negotiations will be critical for assessing whether regional funds remain committed to AI infrastructure or pivot toward domestic reconstruction needs.