Markets are underpricing the risk of Middle East pullback in AI, says tech investor Jack Selby

• Middle East funds represent approximately a quarter of global AI investments for the next five years, with half dedicated to regional data centers and half to worldwide projects and infrastructure
• If UAE, Saudi Arabia and other Middle Eastern countries divert capital to domestic rebuilding amid prolonged conflict, the lost funding could severely impact data center projects and both public and private tech companies
• Selby predicts the AI bubble bust will be 'at least one more zero, probably two and three more zeros' larger than the dot-com crash, representing tens or hundreds of billions in losses due to current overinvestment

Summary: Middle East AI Investment Risk Underpriced, Says Tech Investor

Jack Selby, managing director of Peter Thiel's family office Thiel Capital, warns that markets are underestimating the risk of Middle Eastern capital withdrawal from AI investments due to ongoing regional conflicts.

Key Figures and Facts

Middle East investors—including sovereign wealth funds from the UAE and Saudi Arabia—account for approximately 25% of global AI investments committed over the next five years. Selby estimates half of this funding targets regional data centers, with the remainder allocated to worldwide projects.

Major commitments at risk include:

• $15 billion Microsoft investment in UAE by 2029
• $50 billion reportedly sought by OpenAI from Middle Eastern sovereign wealth funds
• 5 gigawatts capacity planned for OpenAI's UAE campus with Microsoft and BlackRock

Market Implications

If conflicts escalate and Middle Eastern nations redirect capital to domestic rebuilding, the resulting funding gap could significantly impact data center projects and both public and private tech companies. Middle East entities have already begun invoking force majeure to cancel shipping and business contracts, raising concerns about data center project cancellations.

Selby also warns of broader AI bubble risks, predicting potential losses "tens, if not hundreds, of billions of dollars"—potentially exceeding dot-com bubble losses by "one to three zeros."

Investment Strategy

Through his Arizona-based VC fund Copper Sky, Selby is targeting tech firms outside California, New York, and Massachusetts, where he estimates 90%+ of venture capital currently flows. He criticizes family offices making direct investments without proper expertise and notes that two-thirds of venture capital firms are "zombie VCs" failing to return capital.

The warning has significant implications for investors heavily positioned in AI infrastructure and related equities.