About a quarter of global AI investment over the next five years is tied to Middle East investors, and that funding could vanish if the region redirects capital, Jack Selby warned. Selby, managing director of Thiel Capital, told CNBC that sovereign wealth funds and government entities in the UAE and Saudi Arabia have become major backers of AI projects. He said roughly half of that capital goes to data centres inside the region and the rest funds projects and centres worldwide. If withdrawals occur, the effect could ripple through chip and cloud suppliers and into public and private AI companies.

Middle East money and AI infrastructure

Big Gulf funds have moved from passive holdings to active builders in AI. Oracle, Nvidia and Cisco are among the firms working on an OpenAI campus in the UAE that includes plans for roughly five gigawatts of capacity. Microsoft has committed to invest $15 billion in the UAE by 2029. Those deals have tied hardware suppliers, cloud firms and local builders to Middle East capital.

Jack Selby said the sovereign wealth funds of the UAE and Saudi Arabia now play a direct role in private AI funding. He told CNBC that Middle East investors account for about a quarter of the money committed to AI over the next five years. Selby added that half of that regional funding is earmarked for data centres inside the Middle East, with the remainder supporting projects and facilities around the world.

Selby’s warning

Selby said markets haven’t priced how volatile that funding can be. "Markets don't seem to grasp that this is a very real situation," he said, naming the risk and the volatility. He pointed to the Iran war as a factor that could force Gulf states to move capital back home to rebuild or secure their economies. If that happens, he said, some projects could be delayed or cancelled and investors would feel the effects across AI infrastructure.

He also flagged an early sign of strain. Selby said companies and funds tied to the region have already started invoking force majeure clauses to cancel shipping and other business contracts. He said the bigger risk is that cancellations move from logistics to data centres and long-term capital projects. That, he warned, would hit providers of compute and storage and the startups that depend on that capacity.

Exposure across the stack

Selby highlighted how the funding flows into both physical and company-level assets. Data centre builds are capital intensive. They need long lead times and steady financing. When a major fund pulls back, projects can stall.

Mastheads

Hardware orders and construction contracts then face knock-on effects.

Beyond bricks and racks, Gulf capital has taken equity stakes in AI startups and in chip and software vendors. Selby said that makes public markets vulnerable too. He noted a recent Wall Street Journal report about missed revenue targets at OpenAI as a shock that rattled tech and chip stocks. The report, combined with the concentration of Gulf funding, showed how sensitive the market can be to both operational disappointments and capital shifts.

Bubble risk and scale of losses

Selby compared the current investment surge to past tech cycles. He said the AI rollout is soaking up much more capital than earlier waves. The top hyperscalers are expected to spend more than $700 billion this year on compute, networking and related investments, he said. That level of spending raises the scale of both winners and losers.

"AI is a revolutionary technology, don't get me wrong," Selby said. "But it can also be an exceptional bubble." He added that some companies will be extreme winners. He said other firms may suffer losses far larger than in prior busts. "Those losers will be orders of magnitude larger than any of the losers that we've seen before," he said.

Markets have shown jittery reactions already. Chip and cloud stocks fell after the report of weaker-than-expected OpenAI revenue, according to Selby. He said high net worth individuals, family offices and funds that have taken big positions in AI trades need to rethink their exposure to regional funding shocks.

Selby urged investors to factor in the concentration risk tied to Gulf capital. He argued that many buyers have assumed funding is stable. Selby said that assumption might be wrong. If sovereign funds redirect capital, the shortfall wouldn't just delay builds. It would also raise the cost and availability of compute for AI research and product rollouts.

Some companies have already diversified their financing. Cloud providers and chip makers tap multiple funding sources, from public markets to corporate partners. Microsoft’s multi-billion-dollar pledge to the UAE and strategic partnerships with local governments show one path: mix government-linked capital with private deals to share risk.

Still, Selby said the scale of Gulf commitments makes full hedges difficult. Large data centre projects and multi-year purchase agreements create dependencies. When a primary backer changes course, alternatives may not emerge fast enough to fill the gap.

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“Markets don't seem to grasp that this is a very real situation,” Jack Selby, managing director of Thiel Capital, said.

This article was created with AI assistance.