Good morning. Andrew here. We continue to follow the war in Iran, which has also expanded to other parts of the Middle East. DealBook contributor Vivienne Walt takes a look at the increasingly uneasy relationship between big business, big tech and the Persian Gulf, which was once considered a safe haven. And DealBook’s Niko Gallogly has a fascinating interview with a lawmaker trying to regulate A.I. Also make sure to take today’s quiz — it’s best to play with “Price is Right” rules, choosing the closest price without going over. (Was this newsletter forwarded to you? Sign up here.)
Big Tech’s uncertain future in the Persian Gulf
For years, Persian Gulf monarchies like the United Arab Emirates, Bahrain and Qatar have lured U.S. tech companies and Wall Street capital to team up on projects, dangling friendly investment terms and opulent office hubs with luxury towers, cappuccino bars and bikini-friendly beach clubs. Deploying their giant sovereign wealth funds, the governments of these countries have moved aggressively to break their overwhelming dependence on oil and gas revenues. And investors, seeking lucrative new markets, have rushed to oblige. Silicon Valley, in particular, has bought into the Gulf. Tech giants like Nvidia, Microsoft and Oracle all poured money into large-scale facilities across the region, including data centers to power their enormous and growing bets on artificial intelligence. But the war with Iran suddenly threatens to undermine that cozy business relationship. The scope of the conflict has stunned the Gulf nations and their Western business partners over the past week, and raised serious questions for both about the future of these investments — with trillions of dollars hanging in the balance. After the United States and Israel launched coordinated strikes against Iran last weekend, the Iranians’ response included attacks against nonmilitary targets in countries across the region. Iranian drones hit two Amazon Web Service data centers in the Emirates and damaged one in Bahrain earlier in the week. Schools and offices have gone remote. The United States shut its embassies in Kuwait, Lebanon and Saudi Arabia. On Thursday, a billionaire businessman in Dubai lashed out at President Trump on social media for starting the war. The Financial Times reported on Friday that a handful of Gulf states were considering whether to pull back on overseas investments because of the financial impact of the conflict. Anxiety is “through the roof,” Mona Yacoubian, Middle East program director at Washington’s Center for Strategic and International Studies, told DealBook, describing the mood at an iftar dinner in Washington this week. “This is a nightmare scenario for these countries, which have staked so much to becoming a superconnector region in the world,” Yacoubian said. “Dreams are built on the need for stability and a lack of conflict.” Trillions of dollars in playFor Western investors, the stakes have been rising as A.I. spending surges in the Gulf. Stargate UAE, operated by OpenAI and Oracle and powered by top-line Nvidia chips, started in May with a splashy ceremony in Abu Dhabi, featuring OpenAI’s Sam Altman and Nvidia C.E.O., Jensen Huang. It is set to be the world’s biggest data center outside the United States. In December, the State Department unveiled “Pax Silica,” a declaration signed by 11 countries, including Israel, the Emirates and Qatar, pledging to coordinate development of artificial intelligence infrastructure. Gulf countries could be an important part of the build-out, given their prized advantages: Wedged between Asia, Africa and the Middle East, and a middle distance from Europe, the region has plentiful land, cheap electricity and willing populations. Data centers have already proliferated across the Gulf, with 61 in Saudi Arabia and 57 in the Emirates, according to DataCenter Map, an industry intelligence tool. All that makes the Gulf “an emerging epicenter of A.I. infrastructure globally,” Yacoubian said. But risks that seemed remote a week ago now look far more real — with the potential to spread beyond the region. “The vulnerability is no longer hypothetical,” said Kristian Alexander, senior fellow and lead researcher at the Rabdan Security & Defense Institute in Abu Dhabi. Undersea cables are sitting ducksAmong the highest risk factors could be the fiber-optic cables that snake under the Strait of Hormuz and the Red Sea — the Gulf’s two choke points, not only for oil shipments but for data, too. Among the world’s most concentrated digital corridors, they are crucial to keeping parts of Europe and Asia connected to the internet, and experts fear they could be sabotaged, or entangled or dislodged amid chaotic fighting. Such an event has already occurred. In 2024, four major Red Sea undersea cables were damaged when Houthi rebels struck a ship, disrupting about a quarter of the data traffic linking Europe and Asia, including the Middle East. Although data was quickly rerouted, it took months to fully restore the cables. “It shows how quickly connectivity can be degraded, rather than fully go dark,” Alexander said. Land-based infrastructure could also be at risk. On Tuesday, debris from intercepted Iranian drones fell into an oil storage area in Fujairah, an Emirates port city that is also the site of a major cable hub. That underscored the twin threats that the tech and A.I. ecosystem now faces: cyberattacks that can be launched remotely, and wartime strikes that can hit directly. “The threat picture is now blended,” Alexander said. A reality checkUntil a week ago, the violent risks seemed far-fetched. “Before Feb. 28, the assumption was that a cyber risk was constant but kinetic risk was low probability,” Alexander said. Indeed, for years, investors in the Gulf have felt worlds removed from the Middle East’s political strife. But to some observers, that feeling of safety seemed to be an illusion. In 2023, two weeks before Hamas waged a massacre on Israelis, setting off the Gaza war, Matt Gertken, chief geopolitical analyst for BCA Research, traveled to the Gulf to meet with hedge funds and other Western investors. He offered a dire warning, telling them that the Israelis appeared set to bomb Iran’s nuclear facilities at some point, and that the United States was likely to join them. That could lead to a widening regional war, he told them, potentially threatening their business — perhaps even their Gulf lifestyle. Investors were deeply skeptical. “I do geopolitical forecasting for a living,” Gertken said. “But I was sensitive to the fact that I was in Dubai saying: ‘You know, things are going to get bad for a while. It is not what people wanted to hear. It was very contrarian.” This week has shifted the calculus. Alexander said Gulf officials were considering how to harden defenses of their data centers and tech networks, including possibly engineering new infrastructure to withstand missile strikes rather than just cyberattacks, which were regarded as the main vulnerability until now. “The risk was understood in strategic circles,” Alexander said. “But many mitigation efforts were still oriented towards cybersecurity.” In just one week, the war has greatly expanded the risks.
Job growth unexpectedly dipped in February. Data released by the Labor Department on Friday showed employers cut 92,000 jobs last month. Even health care, which has become the lifeblood of the labor market, had job losses. The weak jobs data underscores a dilemma for the Federal Reserve as it balances concerns about a struggling labor market with risks of inflation as a result of widening Middle East conflict. The central bank is still expected to hold rates steady at its next meeting. Rising U.S. gas prices put pressure on President Trump. As oil and gas shipments out of the Persian Gulf have been hampered by the fighting in the Middle East and threats from Iran, the average price of a gallon in the United States hit its highest level since September 2024 on Friday. Trump, who campaigned on promises of lower fuel costs, told Reuters that gasoline prices would “drop very rapidly when this is over, and if they rise, they rise.” Anthropic said it would sue the Defense Department. The Pentagon officially designated Anthropic a “supply chain risk” after the company refused to remove guardrails that prohibit its technology from being used for domestic surveillance of Americans or with autonomous lethal weapons. The label could prevent Anthropic from doing business with the U.S. government, though the Defense Department is said to be using Anthropic’s technology in the widening war against Iran. More big deals: Businesses that sued the Trump administration over tariff refunds scored an early victory. China set its least ambitious annual growth target in decades. And Axel Springer agreed to pay $766 million for The Telegraph.
OpenAI is spending big to defeat this candidateA.I. money is flowing into politics. Leading the Future, a super PAC tied to OpenAI, Palantir and the prominent venture capital firm Andreessen Horowitz, has raised more than $100 million to take down candidates who support A.I. regulation. A chief target: Alex Bores, a Democrat in the New York State Assembly who is running for the U.S. House. Bores, a former software engineer who once worked at Palantir, has become a prominent proponent of A.I. regulation, leading New York State’s effort. He spoke to DealBook’s Niko Gallogly about how to regulate the A.I. industry, the tech giants fighting for and against him and what to make of the dispute between Anthropic and the Pentagon. The interview has been condensed and edited. You co-sponsored the RAISE Act, an A.I. safety bill passed by New York State lawmakers in June. The bill does not address the impact A.I. could have on workers. Is it harder to pass laws targeting the economic concerns around A.I. and automation? In New York, we now require companies to declare whether A.I. contributed to layoffs so we can provide resources to those employees for retraining. But that’s a very small step. When you think about nationwide labor markets, when you think about how easy it is for businesses to move across state lines, I think the federal level is probably the place where we are best suited to have holistic solutions that will actually last. But the federal government hasn’t taken action. So states are often leading the way. The Leading the Future super PAC had spent more than $1.3 million targeting your campaign as of mid-February. They want to paint all of their enemies as anti-innovation, as not understanding technology. But they can’t do that with me, someone who worked in the industry, who talks frequently about the potential benefits of A.I. If they can make an example out of me, they are convinced that will silence anyone else from taking action. Until we have a campaign that shows you can beat that onslaught, they will continue to run that playbook. Anthropic, the OpenAI competitor, has supported your campaign, spending more than $450,000 on ads. Why is an A.I. giant supporting you? You’d have to ask them their motivations. But I am very proud to have support, not just from some of the leaders of Anthropic but from the engineers who are closest to the technology at Anthropic and in OpenAI and at Meta and at Google. The people actually building this technology see how powerful it is and realize that there’s a role for the government. They are engineers. They were not trained on solving societal problems, nor do we want to have those decisions just made in the hands of a few powerful C.E.O.s. Right now, the battle lines are: Should there be any regulation, or should there be none? People that might not agree on specifics are very much coming together to say, no, there is a role for government. Critics of Anthropic argue that the company’s funding of campaigns like yours is merely a branding exercise. They suggest Anthropic is comfortable with regulations like the RAISE Act, which targets safety and security protocols that do not necessarily hurt its bottom line, while opposing oversight of the economic impacts of A.I. or data center expansion. I think that’s asserting a mind-set that I’m not sure is there, but even if it is there, it’s up to elected leaders to stand with people and to fight for what actually benefits everyone. I share the broad skepticism of money in politics in general, while also seeing that we’re currently in an existential fight in terms of our ability to regulate this field at all. The Pentagon is in a high-stakes dispute with Anthropic over its A.I. safety rules. This week, it formally designated the company as a supply chain risk. How should A.I. labs and the Pentagon work together? This whole saga underscores why we need to empower Congress and why we need people who understand A.I. in office right now. We shouldn’t let the Trump administration’s Department of Defense decide unilaterally when and how to deploy A.I. in warfare. Even OpenAI is now loudly saying that they shouldn’t be trusted with these decisions, that decisions to regulate A.I. should be left to a free and fair democracy. DEALBOOK QUIZ The ‘slop bowl’ slumpThis question comes from a recent New York Times article. Click an answer to see if you’re right. (The link will be free.) As grocery prices have ticked up, the cost of eating out has increased even more — and the many restaurant chains offering quick meals in bowls are feeling the pain. Chains like Cava, Chipotle and Sweetgreen have seen traffic soften and stock prices plunge. The cost of groceries has risen 17 percent since 2022, according to the Bureau of Labor Statistics. Around how much has Chipotle raised prices over the same period? We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times. Thanks for reading! We’ll see you Monday. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.
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