Saudi Arabia’s AI Gamble: Will NEOM’s $5 Billion Data Center Deliver?
- Dr. Shahid Masood
- Feb 14
- 4 min read
Saudi Arabia’s NEOM project, an ambitious $500 billion urban development plan, has once again captured global attention with the announcement of a $5 billion AI data center in Oxagon, the project's industrial hub. The facility, to be developed in partnership with DataVolt, is expected to be one of the world’s first fully sustainable AI-driven data centers.
The initiative aligns with Vision 2030, Saudi Arabia’s strategic roadmap to diversify its economy beyond oil, positioning itself as a global leader in artificial intelligence, data processing, and cloud computing. While the 1.5-gigawatt data center is marketed as a revolution in energy-efficient AI infrastructure, experts remain skeptical about its feasibility, sustainability, and ethical implications.
This article provides a comprehensive analysis of the project, placing it within the broader context of AI-driven digital economies, sustainability challenges, and global geopolitical dynamics.
NEOM and DataVolt: The $5 Billion Agreement
Project Overview
The agreement between NEOM and DataVolt represents a significant investment into Saudi Arabia’s AI and digital infrastructure. With an initial capacity of 1.5 GW, the AI data center is expected to power high-performance computing (HPC), cloud services, and large-scale AI model training while being entirely sustainable.
Key Features of the AI Data Center
Feature | Details |
Investment | $5 billion (Phase 1) |
Location | Oxagon, NEOM, Saudi Arabia |
Planned Capacity | 1.5 GW |
Operational Timeline | Phase 1 by 2028 |
Energy Source | 100% renewable (solar, wind, green hydrogen) |
Cooling Technology | Advanced liquid and immersion cooling |
Fiber Connectivity | Sub-sea fiber-optic network |
Primary Use Cases | AI training, cloud computing, HPC workloads |
According to Rajit Nanda, CEO of DataVolt,
“This agreement underscores our unwavering commitment to support the Kingdom’s vision of becoming a regional digital and AI hub. By leveraging Saudi Arabia’s renewable energy resources, we aim to set a new standard for sustainable computing.”
Similarly, Vishal Wanchoo, CEO of Oxagon, stated,
“Oxagon is the ideal location for this facility, offering a unique combination of infrastructure, energy efficiency, and access to a growing industrial ecosystem.”
While the promises are grand, the execution remains uncertain, particularly in light of NEOM’s history of over-promising and under-delivering on its mega-projects.
The Exploding Demand for AI Data Centers
The Energy Challenge of AI Infrastructure
The rise of AI-powered applications—including large language models (LLMs), generative AI, and deep learning algorithms—has exponentially increased global computing power demand.
Projected Growth in AI Data Center Power Consumption (TWh, Terawatt-hours)
Year | Global Data Center Power Consumption | AI-Driven Increase |
2022 | 460 TWh | - |
2024 | 530 TWh | 15% |
2026 | 900 TWh | 70% |
2030 | 1,400 TWh | 120% |
AI requires enormous computational resources, leading to higher power demands than traditional cloud computing. Companies like Microsoft, Google, and Amazon are already struggling to balance AI growth with sustainability goals, raising concerns about whether NEOM’s AI factory can genuinely achieve a net-zero carbon footprint.
Saudi Arabia’s Renewable Energy Potential
NEOM’s AI factory intends to operate using 100% renewable energy, leveraging the Kingdom’s vast natural resources.
Renewable Energy Potential of Saudi Arabia
Energy Source | Potential Capacity | Current Utilization |
Solar | 35,000 MW | 3,000 MW (8.5%) |
Wind | 16,000 MW | 600 MW (3.75%) |
Green Hydrogen | 4 million tons/year | Pilot projects only |
Saudi Arabia has committed $50 billion toward renewable energy projects by 2030, but its current renewable energy adoption remains significantly behind schedule.
Oxagon: A Strategic Choice for AI Infrastructure?
Why Was Oxagon Chosen?
Oxagon, NEOM’s "floating industrial city", was selected for the AI data center due to its strategic location, infrastructure, and energy potential.
Key Advantages of Oxagon
Renewable Energy Access – Oxagon is positioned near large-scale solar farms and wind turbines, reducing transmission losses.
Geostrategic Location – Its location along the Red Sea enhances access to global subsea fiber-optic networks, boosting international AI infrastructure.
Industrial Ecosystem – Oxagon aims to attract high-tech industries in AI, robotics, and automation, fostering an innovation hub.
However, Oxagon itself is still under construction, raising doubts about whether it will be ready to support AI infrastructure by 2028.
Challenges and Controversies Surrounding NEOM
1. Unrealistic Timelines and Financial Overruns
NEOM was originally projected to cost $500 billion, but many estimates now suggest it could exceed $1.5 trillion. Several deadlines have already been missed, casting doubt on whether the AI factory will be operational by 2028.
2. Human Rights and Labor Concerns
International watchdogs have raised concerns about labor conditions in NEOM’s construction workforce, with reports of migrant worker deaths and forced relocations. Saudi authorities have dismissed these allegations as misinformation, but independent investigations continue.
3. Data Privacy and AI Ethics
Saudi Arabia’s data privacy laws remain underdeveloped compared to European GDPR standards. With AI requiring massive amounts of user data, concerns about surveillance, data security, and AI misuse remain unresolved.
How NEOM Compares to Other AI Data Centers
Project | Investment | Energy Source | Challenges |
Google AI Data Centers | $9 billion | Mixed (grid + solar) | Energy efficiency constraints |
Microsoft’s AI Cloud Expansion | $13 billion | Grid-dependent | High carbon footprint |
Amazon AWS Green Data Centers | $7 billion | 80% renewable | Scaling sustainability |
NEOM DataVolt AI Factory | $5 billion | 100% renewable (planned) | Execution & feasibility doubts |
While NEOM’s fully renewable AI vision is unique, past projects indicate significant hurdles in scaling AI while maintaining sustainability.
A Paradigm Shift or a Futuristic Mirage?
NEOM’s $5 billion AI data center is a bold move toward a future where AI infrastructure is entirely sustainable. If successful, it could position Saudi Arabia as a global leader in AI-powered economies. However, given the technical, environmental, and ethical challenges, skepticism remains warranted.
The world will closely watch whether NEOM’s AI factory becomes a global benchmark—or another unrealized tech utopia.
For more expert insights on AI, digital transformation, and emerging technologies, follow Dr. Shahid Masood and the expert team at 1950.ai.
It's quite interesting that wealthy countries like gulf ones, are trying to occupy a notable space in future technologies and new trends. But it will not be as easy as infrastructure copied and innovated from developed nations. Tech innovations demand huge amounts of human resource more specifically experts and innovators. Will they be able to compete USA in attracting intelligent brains across the world.