The Trump administration placed a major geopolitical bet on the Persian Gulf as the engine of American AI development. Saudi Arabia, Qatar, the UAE, and Oman were courted as both hosts for data centers and investors in US AI firms. The AI industry aligned with a White House that championed unrestricted growth, "Hvylya" writes, citing The Atlantic.
That strategy has now collided with the same administration's decision to go to war in Iran. The Strait of Hormuz is functionally closed, stranding vast quantities of oil, gas, helium, and sulfur. Iran and Israel have begun bombing fossil fuel infrastructure that could take years to replace. Paul Kedrosky, an investor and financial consultant, told The Atlantic the situation is defined by "interlocking points of fragility" - unlike the 2008 crisis, where commercial real estate was the core problem, this time the vulnerabilities span energy, manufacturing, finance, and geopolitics at once.
The damage runs in multiple directions simultaneously. Qatari and Saudi investment capital is drying up as the petrostate revenues are shrinking. Sustained high energy prices are driving up costs for chip manufacturing and data center operations. Iran has already bombed Amazon data centers in the UAE and Bahrain, demonstrating that US-built infrastructure in the region is directly in the line of fire.
The AI firms themselves bear significant responsibility, according to The Atlantic's analysis. At every step, the industry prioritized speed above supply chain redundancy, energy independence, and long-term resilience. In the quest for growth, it pulled enormous amounts of capital from investors all chasing the same opportunity - ensnaring the entire economy in the process. Kedrosky described the resulting system as "fragile and overdetermined" - one that "must break, so it will."
If Silicon Valley is even forced to slow down, the viability of these investments will likely be questioned in ways that could ripple across the financial system. Virtually all US economic growth in late 2025 came from AI investments. A stall in that spending would hit not just tech firms but the banks, private equity funds, pensions, and 401(k) holders tied to them. As The Atlantic concluded: the AI industry was not made for the turbulence its leaders helped usher in.
Also read: why China's three months of oil reserves and a failing economy prevent it from antagonizing the US.