Desert and Rainforest — Why Abu Dhabi and Johor Bahru Became AI Hubs at the Same Time

Personal analysis. Not investment advice. Data from public sources, Knight Frank, company announcements, and US/UAE/Malaysia government releases. March 2026.

The two cities have almost nothing in common on the surface. One is a desert oil state, the other an equatorial multi-ethnic nation. Yet both became concentrated destinations for global AI data center investment around the same time — and continue to be.

Why did the same thing happen in such different places? And beneath the surface similarity, what is fundamentally different?

The shared logic: both absorbed overflow demand

JB's growth came from Singapore's moratorium. When Singapore effectively stopped approving new data centers in 2019, demand redirected to JB, one kilometer across the causeway.

Abu Dhabi's rise has a structurally similar story. Dubai's premium areas face rising land costs and zoning constraints. Abu Dhabi offers purpose-built development zones — KEZAD and Masdar City — where land, power, and infrastructure connections are bundled together by state-backed entities, making large-scale AI campuses easier to develop.

The investment dynamic was also different from JB in one important way. It was largely the UAE side — Sheikh Tahnoon bin Zayed and G42 — that actively courted US hyperscalers, and the US that responded. The result was Stargate UAE: a joint venture between G42, OpenAI, Oracle, Nvidia, and SoftBank, announced in May 2025 with both the UAE president and Donald Trump present. The planned capacity is 5GW — larger than JB's entire pipeline of 3.4GW.

Both cities, in other words, were shaped by the same combination of forces: constraints at nearby established hubs, and deliberate investment attraction on their own part.

The key difference: the type of geopolitical risk

Both cities appear to face “US-China tension” as a risk, but the nature of that tension is completely different.

Abu Dhabi chose a side.

G42 divested from all its Chinese investments in 2023 and 2024, removed an estimated $1.7 to $2 billion worth of Huawei equipment from its data centers, and exited its stake in ByteDance. This was a direct response to US government pressure — effectively a loyalty test. In return, the US approved the export of up to 500,000 advanced NVIDIA processors annually to the UAE.

The Stargate UAE campus is designed specifically for US hyperscalers, with strict KYC protocols controlling access. This is distinct from the broader UAE market: Alibaba Cloud operates a data center region in Dubai, and Huawei has cloud infrastructure in Saudi Arabia. Stargate UAE is one facility within a region where Chinese operators also have a presence — it is not a China-free zone across the UAE.

Malaysia is trying not to choose.

The Malaysian government actively welcomes investment from both sides. Former deputy minister Ong Kian Ming has publicly stated that JB is open to US and Chinese tech companies alike. Prime Minister Anwar maintains a non-aligned posture. The consequence of that openness has been pressure from both directions: the US scrutinized Malaysia as a potential GPU diversion route to China, and when Malaysia cooperated with US oversight requests, China criticized it for taking sides.

Neither position is obviously right. But the risk profiles are different. Abu Dhabi's risk is concentrated: if its relationship with the US deteriorates for any reason, the entire model breaks. Malaysia's risk is diffuse and ongoing: either side can apply pressure at any time.

Physical war risk

In late February 2026, the US and Israel launched strikes against Iran.

As of the time of writing, Abu Dhabi's data center infrastructure is exposed to real military risk. The UAE intercepted 165 ballistic missiles, two cruise missiles, and 541 drones over two days of exchanges. Thirty-five drones and five projectiles got through, hitting Jebel Ali Port and buildings in Dubai. An Amazon data center in the UAE reportedly caught fire during the strikes.

“It is cheaper to attack than to defend.” That is the asymmetric reality of the conflict.

JB has no equivalent physical military risk. The geopolitical squeeze is real, but missiles are not flying toward Johor. For long-term infrastructure investment, that difference is not trivial.

Power and cooling: desert versus rainforest

Abu Dhabi is an oil and gas producer with abundant, stable power. Stargate UAE combines nuclear, solar, and gas in its energy design. Grid reliability is among the highest in the world.

The challenge is cooling. Servers that generate large amounts of heat in 50°C desert conditions require substantial energy to cool. This pushed Abu Dhabi toward liquid cooling, reclaimed water systems, and seawater cooling years before Malaysia faced the same pressure. The Middle East confronted the “stop using potable water for cooling” problem a decade earlier than JB is confronting it now.

JB sits on the equator. It is not as hot as Abu Dhabi, but high humidity reduces air cooling efficiency. Power comes from TNB's grid, and whether supply can keep pace with the 3.4GW pipeline remains genuinely uncertain.

In terms of energy headroom, Abu Dhabi has a clear advantage.

Infrastructure depth: what is buried underground

In a previous piece about Abu Dhabi, I wrote about what I found when I looked into the facilities near Al Reem Island that I had walked past without thinking much about.

The STEP sewage tunnel runs 41 km at depths up to 105 meters, operating entirely on gravity with no intermediate pumping stations. A power outage does not stop it. The Liwa aquifer storage project — the world's largest desalinated water ASR project — holds enough emergency supply to provide the entire city of Abu Dhabi for 90 days. Both were built over decades, largely invisible to residents.

JB's infrastructure is not yet at that level. Water problems became visible because the underlying systems were too fragile to handle the sudden surge in industrial demand. Bridge DC is building a reclaimed water plant, AirTrunk is deploying liquid cooling, Microsoft is designing zero-water-evaporation facilities. These are real improvements. But they are starting in 2024 and 2025. Abu Dhabi's infrastructure depth took decades to build.

What each city is actually building

This may be the most fundamental difference.

Abu Dhabi is trying to become an AI-producing country.

Stargate UAE, G42's Falcon (an Arabic-language LLM), Mohamed bin Zayed University of Artificial Intelligence — Abu Dhabi is not just hosting AI infrastructure. It is trying to build the capacity to create AI. The data centers are a means, not an end. The national strategy is to use AI the way oil was used: as the foundation for the next 50 years of economic output.

The Stargate UAE campus includes a science park for AI innovation. The design integrates research, development, and talent training, not just compute capacity.

JB is functioning as a compute location.

JB's role is primarily to serve as a cheaper extension of Singapore. Tenants are multinationals headquartered in Singapore; JB provides the backend at lower cost. Anwar's repeated insistence on economic spillover reflects his recognition that this model, if left unchanged, does not transfer much capability to Malaysia.

Malaysia has a National AI Strategy (NAIES), and the ambition to use AI for economic development is genuine. But the practical reality is closer to “attract AI infrastructure and extract economic benefit” than “build AI.”

The post-oil bet

Reading Abu Dhabi's AI investment purely as infrastructure misses the point.

The Abu Dhabi Economic Vision 2030 was set out in 2006. Its core objective: shift from oil dependence toward a knowledge-intensive economy. By 2025, non-oil sectors already account for over 75 percent of UAE GDP — partly a policy success, partly a reflection of urgency about what comes after oil.

Seen through this lens, the AI investment is a straightforward move: use oil revenues to buy the next resource. If oil was the defining resource of the 20th century, compute capacity may be the defining resource of the 21st. G42, Mubadala, ADIA, MGX — Abu Dhabi's sovereign capital concentrating in AI infrastructure reflects something more than investment return calculations. It is about securing a strategic resource before the competition locks it down.

The Stargate UAE announcement framed this explicitly: a facility capable of reaching half the world's population within a 3,200 km radius. India, Pakistan, East Africa, the broader Middle East — all within that range. JB competes on “5ms from Singapore.” Abu Dhabi is competing on “AI infrastructure hub for the Global South.” The ambition is a different order of magnitude.

The non-aligned legacy and its limits

The UAE has historically been skilled at not choosing sides. It is a member of the Non-Aligned Movement, joined BRICS in January 2024, maintains security ties with the US, deep economic ties with China, and close trading relationships with India. This multi-alignment strategy — staying useful to all major powers — is how a small country of roughly 10 million people has punched well above its weight diplomatically and economically.

That equilibrium began to fracture under AI geopolitical pressure in 2023 and 2024.

G42 removing an estimated $1.7 to $2 billion worth of Huawei equipment and divesting all Chinese investments was a direct response to US pressure — a loyalty test passed. At the same time, the UAE maintained its BRICS membership, continued participating in mBridge (China's cross-border digital currency settlement platform), and kept economic relationships with Chinese firms in other sectors. The architecture being constructed is: technology aligned with the US, financial and economic relationships deliberately diversified.

Whether this two-layer structure is sustainable depends on how far US-China competition intensifies. As AI infrastructure becomes a more explicit front in that competition, the space for “both sides” shrinks. Abu Dhabi is trying to hold the non-aligned identity while having already made the harder choice at the technology layer. Malaysia's Anwar is attempting the same thing at a different level of commitment.

Neither will find it easy if the competition continues to escalate.

Strengths and risks

Abu Dhabi's strengths: State-designed stability. Oil revenues underwrite power and water infrastructure. Clear US alignment secures chip supply. Infrastructure depth provides long-term reliability.

Abu Dhabi's risks: Direct physical exposure to the Iran conflict. Having chosen a side completely, there is no fallback if the US relationship changes.

JB's strengths: The irreplaceable one-kilometer proximity to Singapore via the causeway. The flexibility to attract both US and Chinese investment. Malaysia's economic growth momentum.

JB's risks: Continuous US-China pressure from both directions. Power and water infrastructure that is still catching up. The structural risk of remaining a “compute location” without becoming more.

Same phenomenon, different futures

Abu Dhabi's data center buildup started earlier — Microsoft opened Azure regions there in 2019, and the hyperscale investment wave accelerated through the early 2020s. JB's rapid expansion began around 2023, following the ChatGPT moment. Both pipelines now extend well into the 2030s. On the surface it looks like the same story. Underneath, the design logic is fundamentally different.

Ten to twenty years from now, the divergence will likely be clearer. Abu Dhabi will have become a genuine AI-producing hub in deep partnership with the US — or the long war in the Middle East will have disrupted that ambition. JB will have absorbed Singapore's overflow demand steadily and pragmatically — or newer competitors like Batam will have eroded its advantage.

The reasons to watch both are specific: Abu Dhabi for the depth of its state-backed infrastructure and its firm US alignment; JB for the proximity to Singapore that no other city can replicate. Those are entirely different reasons — which is precisely the point. Having once lived in Abu Dhabi, now on MM2H in Malaysia with property on Al Reem, I have had an unusually direct view of both.

Related terms: Stargate UAE, G42, MGX (Abu Dhabi AI investment vehicle), STEP (Abu Dhabi deep sewer tunnel), ASR (Aquifer Storage and Recovery), JS-SEZ, NAIES (Malaysia's National AI Strategy). Related: What I Found Underground in Abu Dhabi · UAE Solar Is Cheaper Than Qatar's Gas.