Judah’s view
I’ve spent the past two years watching capital flood into AI initiatives across the Middle East. Founders with decent slide decks raising at valuations that would make you blush. Corporates launching “AI labs” with no clear sense of why. Governments announcing multibillion-dollar funds with zero ability to deploy them.
Too many players have mistaken the AI boom for a chance to buy credibility rather than to build capability. They have confused announcing initiatives with actually shipping products, treating AI like a branding exercise instead of an operational transformation.
An AI correction is inevitable. And when it comes — whether as a crash or simply a painful repricing — the countries that treated AI as a trophy will get crushed. The ones that built real infrastructure, attracted real talent, and focused on unsexy fundamentals will survive.
The problem is that most of the region is in the first category.
The Gulf states have thrown enormous capital at AI: massive sovereign commitments, splashy partnerships with OpenAI and Anthropic, data center announcements that sound like science fiction. On paper, it looks like leadership. In practice, it’s a bet that money can substitute for ecosystem maturity. And that bet only works in a bull market.
When the downturn hits, the Gulf faces the danger of stranded commitments. These include multiyear infrastructure projects, regulatory frameworks designed for companies that may not show up, and talent pipelines built for a hiring market that’s already cooling.
I’m not saying the Gulf can’t win. I’m saying the current playbook — outspend everyone, attract the biggest names, build it and they will come — stops working the moment Western budgets freeze and hyperscalers start prioritizing profit over expansion.
The medicine isn’t more capital. It’s operational credibility: contracts that work without subsidies, talent retention that doesn’t depend on hefty salary premiums, and use-cases that actually generate revenue.
Most of the companies that got funded in the Middle East in the past 24 months won’t make it. The wrappers — enterprises that took an open-source model, added a user interface, and called it a product — will disappear first. Then the consulting firms masquerading as software companies will follow. Then the startups that raised on vision but never figured out distribution.
What survives? Businesses that solved real problems for customers willing to pay. Infrastructure that actually gets used, not just announced. Countries that built for the long game instead of the next headline.
The Middle East has an opportunity to leapfrog others and become a leading tech hub, with numerous advantages other geographies can only dream of. But it also has a choice. It can keep playing the incentive game, with countries trying to outbid each other for projects, or it can build the boring foundations that matter when the hype fades: reliable power grids, fast permitting, and technical education systems that produce engineers who ship code, not simply credentials.
Judah Taub is the founder and managing partner of Hetz Ventures, an Israeli early-stage venture capital firm specializing in cybersecurity, data, and AI infrastructure.
Notable
- Gulf companies and investors are pouring billions of dollars into AI developments, but many organizations have little to show for their efforts thus far, according to research by McKinsey & Co.
- Amid a growing AI inequality gap, Gulf’s cities are in a strong position to capitalize on emerging opportunities and strengthen their role in the AI value chain, says Oxford Economics.