The $1 Billion Question: Can Hyperscalers Afford to Lose a Data Center to War in 2026?

Key Points

• The strikes during Operation Epic Fury showed that hyperscale facilities can become direct military targets.

• Even if a $1 billion facility is destroyed, giants like Amazon, Microsoft, Alphabet, and Meta Platforms are planning roughly $630 billion in 2026 capex, making a single data center loss financially manageable.

• If tensions persist, future data center builds could gradually move away from Gulf hotspots toward lower-risk regions.

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I never thought I’d be writing a sentence like this, but here we are: Iranian drones struck three Amazon Web Services data centers in the United Arab Emirates (UAE) and Bahrain on March 1, marking the first confirmed military attack on a hyperscale cloud provider in history.

And suddenly, the trillion-dollar artificial intelligence (AI) infrastructure boom has a question that Silicon Valley wants to answer. Can hyperscalers actually afford to lose a data center to war?

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For me, the short answer is yes. Financially, they can absorb it. But the longer answer is far more uncomfortable, and it’s the one I think matters for investors.

Image source: Getty Images.

What happened?

The United States and Israel launched Operation Epic Fury on Feb. 28, a coordinated strike campaign against Iranian military infrastructure. Iran retaliated broadly, firing over 500 ballistic missiles and nearly 2,000 drones across the region.

Among the targets? Two AWS data centers in the UAE and one in Bahrain.

The strikes took out two of three availability zones in AWS’ UAE cloud region, causing structural damage, power disruptions, and water damage from fire suppression systems.

Services went dark for banks like Emirates NBD and First Abu Dhabi Bank, ride-hailing platform Careem, and payment services Hubpay and Alaan. AWS told customers recovery would be “prolonged.” Iran’s Islamic Revolutionary Guard Corps (IRGC) even claimed it targeted the Bahrain facility specifically because it believed AWS hosted U.S. military workloads there.

The math behind the attacks

Here’s where it gets interesting. A standard hyperscale data center costs between $7 million and $12 million per megawatt of commissioned IT load to build. A typical 50 MW facility can run $800 million to over $1 billion once you layer on electrical systems, cooling infrastructure, and AI-optimized fit-outs. The average data center that broke ground in 2025 cost a record $633 million.

So yes, losing one facility is easily a billion-dollar hit when you factor in equipment, rebuild timelines, and lost revenue.

But Amazon, Alphabet, Meta Platforms, and Microsoft are planning to spend a combined $630 billion in capital expenditures in 2026 alone. That’s a 62% increase over 2025’s already record $388 billion. Amazon alone has earmarked $200 billion. Roughly 75% of that aggregate spend — about $450 billion — is going directly toward AI infrastructure.

Against that backdrop, a $1 billion data center loss is a rounding error. Amazon’s stock actually rallied roughly 3% after the strikes. Analysts reasoned that the physical vulnerability would force enterprises to deploy multiregion disaster recovery, effectively driving up cloud revenue.​

The real cost isn’t the building

I’d argue the real damage isn’t measured in concrete. It’s measured in confidence. Between 2021 and 2024, the Middle East was a prime target for hyperscale expansion, fueled by sovereign AI ambitions and massive capital from Gulf wealth funds. Saudi Arabia alone saw over $21 billion in data center investment pledges in early 2025. The Middle East data center market was projected to grow to $7.19 billion by 2031.

The drone strikes just rewrote the risk calculus for that entire region. Experts are now calling for data centers to be classified as “critical infrastructure” and protected under nationwide missile defense systems.

Others are raising the specter of “war risk” clauses in cloud service contracts and spiking insurance premiums for Gulf facilities.

And the legal exposure is real. Regional courts are likely to view operating in a conflict zone as a foreseeable risk, meaning cloud providers — not clients — could be forced to absorb the financial damage.​

So, can hyperscalers afford to lose a data center to war? Financially, absolutely. These companies are spending at a pace that would make the Pentagon blush. But can they afford the precedent?

That’s the billion-dollar question I don’t think anyone has answered yet.

I think the Middle East’s massive AI infrastructure boom just collided with a brutal new reality: In modern warfare, data centers are now themselves becoming military targets. I think hyperscalers won’t abandon the region because of the capital, energy, and strategic location, but they will hedge by slowing new projects and strengthening security around existing facilities.

If tensions persist, the next wave of AI infrastructure may quietly shift toward safer regions like Northern Europe, India, and Southeast Asia.

If that happens, you may see a dip in some stock prices.

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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.