A global wave of investment in data centers and economic challenges facing Türkiye and the United States

The world may spend $31.6 trillion on data centers until 2050, in one of the largest waves of investment related to artificial intelligence, with data centers transforming from supporting infrastructure for the digital economy into a strategic asset that countries and companies are competing to develop.

This wave does not stop at the construction of facilities; Computing acceleration requires frequent upgrades of servers, chips, and technology equipment, as well as increasing amounts of electricity and cooling capacity.

According to a report issued by PricewaterhouseCoopers, based on modeling conducted by Oxford Economics that included 46 countries and territories, annual spending on data centers will rise from about $800 billion in 2026 to $1.1 trillion in 2030, then to $1.8 trillion in 2050.

This investment differs from previous infrastructure cycles, such as railways, electricity and the Internet; Spending does not decrease after the centers are completed, given the constant need to update servers, graphics processing units, and ICT equipment every 4 to 6 years.

Equipping data centers with technical equipment accounts for the largest portion of spending. ICT equipment represents about 70 percent of total capital spending in 2026, with its share rising to 93 percent by 2050. This reflects the increasing role of chips and graphics processing units in running AI loads.

Middle East

The report estimates cumulative spending on data centers in the Middle East at approximately $1.1 trillion until 2050, with the region recording the fastest compound annual growth rate among the regions covered by the study.

The report links this growth to the decline in the existing data center base in the region, in addition to its ability to accelerate project implementation, through coordination of energy, financing, planning, and development chains.

The region's expansion is largely dependent on data centers dedicated to AI loads, with it aiming to attract international loads as well as meet local demand. This gives the region an opportunity to grow, but increases its vulnerability to any disruptions to advanced chip supplies.

In the scenario of restricting access to advanced chips, cumulative spending on data centers in the Middle East decreases by about 29 percent, with the impact concentrated in Saudi Arabia, Qatar, and the UAE, as a result of these markets relying more heavily on attracting international artificial intelligence loads, according to the report.

If data sovereignty becomes a regulating principle for the market, cumulative spending in the Middle East will decrease from about $1.1 trillion to $1 trillion, with some international loads declining, while smaller Gulf markets benefit from increased hosting of local demand.

These transformations are emerging at a time when Saudi Arabia is moving to expand its capacity to accommodate advanced computing, with the growth of data centers, and attracting companies specialized in artificial intelligence chips, thus enhancing the interconnection between chip manufacturing and providing the necessary infrastructure to operate them. Saudi Arabia has attracted American and Asian artificial intelligence companies to prepare its infrastructure.

Power and cooling

Data center expansion requirements are not limited to chips and servers; Electricity and cooling represent an essential part of the economic equation for operating artificial intelligence infrastructure.

The report identifies the availability of electricity at competitive prices and with high reliability, as the most prominent factor in determining the direction of new investments, in addition to the ability of transportation networks and conversion stations to accommodate demand and quickly provide energy.

As computing density rises, so do data centers' needs for more efficient cooling systems, linking the expansion of artificial intelligence directly to the air conditioning and refrigeration solutions market. Especially in markets with high temperatures, such as Saudi Arabia.

Cooling efficiency gains additional importance in data centers. Higher density of computing equipment can force upgrades to power and cooling systems, as well as upgrades to servers and graphics processing units.

This relationship means that the wave of investment in data centers extends to more than one sector. The increased demand for computing pushes chip companies to develop more efficient processing units, while these units need data centers capable of accommodating their loads, and these centers in turn require larger amounts of electricity and advanced cooling systems.

A new map for investment

The Americas account for about $16.5 trillion of cumulative spending expected until 2050, including $15.1 trillion for the United States, while Asia and the Pacific’s share is $8.2 trillion, and Europe is $5.6 trillion, compared to $255 billion for Africa.

The report believes that the investment map will not be determined by the size of the economy alone, but rather by the ability of countries to provide electricity, chips, communication, and digital infrastructure, in addition to the regulatory environment necessary to host advanced computing capabilities.

He concludes that the data center investment cycle differs from previous waves of infrastructure; Establishing the facility does not represent the end of spending; Rather, it is the beginning of a recurring cycle of updating computing equipment, making demand for chips, power, and cooling an ongoing part of the AI ​​economy until 2050.

Turkey raised its inflation expectations at the end of this year to 28.4 percent, in an adjustment that reflects the direct and indirect effects of the war with Iran on energy and commodity prices, while the government stuck to its path aimed at returning inflation to single digits by 2029, in parallel with accelerating economic growth to 5 percent.

Turkish Vice President Cevdet Yilmaz said, on Sunday, when presenting the government’s medium-term economic program for the period 2027-2029, that combating inflation took longer than expected as a result of the repercussions of the war. Pointing out that the direct and indirect effects of the conflict on inflation are estimated at about 7 percentage points, according to estimates by the Turkish Central Bank.

Yilmaz expected that inflation would begin to decline again during the last quarter of 2026, reaching 28.4 percent by the end of the year, before falling to 21 percent in 2027, 13.5 percent in 2028, and then 9 percent in 2029.

These expectations are much higher than the government's previous target. In its previous medium-term program for the period 2026-2028, Ankara expected inflation to reach 16 percent by the end of 2026.

Annual inflation slowed slightly to 31.51 percent in August, compared to 31.75 percent in July, according to official data.

Yilmaz said that the strong downward trend in inflation had “stabilized temporarily” as a result of supply-side pressures resulting from the repercussions of the war, but he stressed that the government had made “significant progress” in combating inflation, which remains the main priority of its economic program.

Growth is back accelerating

In exchange for raising inflation expectations, the Turkish government aims to return the economy to a faster growth path in the coming years. It expects GDP growth to accelerate from 3.3 percent this year to 4.2 percent in 2027, then 4.6 percent in 2028, reaching 5 percent in 2029.

Ankara is betting that continued low inflation and improved economic stability will provide a stronger foundation for growth and investment, while at the same time maintaining fiscal discipline.

The government expects the budget deficit as a percentage of GDP to decline to 3.5 percent in 2027, then to 3.1 percent in 2028 and 2.8 percent in 2029.

It also aims to gradually reduce the unemployment rate from 8.1 percent in 2026 to 7.6 percent in 2029, while providing about 2.1 million additional jobs during the program period, pushing the unemployment rate to less than 8 percent by the end of 2029.

7 percentage points from the repercussions of the war

The war in the Middle East became a major factor in recalculating the Turkish economy. Especially in light of its impact on energy and commodity markets and transportation costs.

Yilmaz said that the government is closely monitoring regional tensions and their effects on energy and commodity markets, and is taking measures to limit their repercussions on the Turkish economy.

High energy costs represent a particular challenge for Turkey, which relies heavily on energy imports, making any sharp rise in oil and gas prices potentially transferable to production and transportation costs and consumer prices.

Yilmaz said that the government had put in place a set of policies that he described as “realistic and consistent” to achieve the program’s goals, stressing that combating inflation and financial discipline will remain the top priorities.

An ambition for an economy exceeding $2.2 trillion

The goals of the new program are not limited to inflation and growth; The government seeks to raise national income to more than $2.2 trillion, and to increase exports of goods and services to $450 billion by the end of the medium-term program period.

This reflects Ankara's attempt to balance reducing inflation and restoring growth, after years of sharp price increases. Annual inflation exceeded 30 percent since December 2021, before peaking at more than 75 percent in May 2024, and then began a gradual downward path.

The government program believes that the continuation of this path, in addition to controlling public finances and increasing production and exports, represents the basis for reaching single-digit inflation in 2029.

However, raising inflation expectations for this year to 28.4 percent, compared to 16 percent in previous expectations, reveals the extent of the shock that the war imposed on Turkish economic accounts, and puts the government’s ability to continue lowering prices to a new test in the coming months.

US President Donald Trump's pressure on the Federal Reserve is no longer limited to demanding a reduction in interest rates. Rather, he has moved to link monetary policy directly to trade policy, in an unusual threat that the United States will stop trade with countries with which it has a trade deficit if the central bank does not respond to its demands. This comes at a very sensitive moment for US monetary policy, as August jobs data showed stronger than expected, prompting markets to increase their bets on raising interest rates instead of lowering them.

Thus, Trump puts Federal Reserve Chairman Kevin Warsh before a complex political and economic equation: respond to pressure from the White House, or cling to the independence of the central bank and face inflation that is still higher than its target. On the other hand, implementing the threat to halt trade with major partners will not necessarily lower prices or borrowing costs, but may lead to disruptions in supply chains and higher commodity costs, adding new inflationary pressures to the US economy.

This confrontation is gaining greater importance because, for the first time, Trump is linking this clearly between the interest level and US trade relations, at a time when the Federal Reserve is preparing for its meeting on September 15 and 16, while investors are waiting for the upcoming inflation data to determine whether the economy needs to tighten monetary policy or keep it unchanged.

Trump said in a post on his “Truth Social” platform on Friday: “Reduce interest rates or I will stop trade with countries with which we have a deficit,” considering that this option is better than imposing customs duties.

He added that the Federal Reserve Board, led by Kevin Warsh, whom he personally chose to succeed Jerome Powell, “must act intelligently,” calling on its members to demonstrate what he described as “patriotism.”

Inflation and the labor market...a complex equation

Warsh indicated last week that he was willing to support a rate hike if inflation remained high, saying during his speech at the annual Jackson Hole symposium that the bank must be confident that core inflation is heading towards its 2 percent target “clearly and quickly enough.”

Federal Reserve Governor Michael Barr also said that he is ready to vote in favor of raising interest rates soon if new inflation data do not show progress in returning price increases to the 2 percent level.

On the other hand, Governor Chris Waller expressed his willingness to wait longer to monitor economic developments, but said that he would support raising interest rates if inflation does not eventually slow.

The US Consumer Price Index data expected next week is of particular importance in determining the direction of the next decision, after the annual inflation rate rose to 3.4 percent in July, an increase of a full percentage point since the outbreak of the war with Iran in February.

The rise in gas and oil prices was the main driver of this increase, after oil tankers faced great difficulty in crossing the Strait of Hormuz, which led to higher transportation costs for companies, and prompted a number of companies to warn of new increases in the prices of goods and services.

A threat that could raise inflation

Trump's implementation of his threat to stop trade with countries with which the United States runs a deficit would lead to more inflationary pressures, as American companies would need to find alternative suppliers for the goods they currently obtain from those countries.

Replacing certain suppliers quickly may be extremely difficult, or even impossible in some sectors, which could lead to disruptions in supply chains and higher costs of goods for businesses and consumers, as well as potentially negative impacts on the broader economy.

The US trade deficit with all trading partners amounted to about $1.2 trillion last year, while the United States recorded the largest single deficit with China, at more than $200 billion, followed by Mexico and Vietnam.

Continuing campaign against the "Federalists"

Trump's threat does not represent the first time this week that he has called for lowering interest rates. In an interview with reporters in the Oval Office (Monday), he described the mere talk of raising interest as “ridiculous,” saying that the economy’s success in achieving growth does not lead to inflation, and that the rise in prices results from other reasons.

This comes as part of an ongoing campaign by Trump to pressure the Federal Reserve to reduce borrowing costs, at a time when the central bank is trying to maintain the independence of its monetary decisions.

The president's pressure included an attempt to dismiss Federal Reserve Governor Lisa Cook on charges of fraud in real estate transactions, which were not proven judicially, and she was not accused of committing violations.

Last year, the US Department of Justice opened a criminal investigation into Powell's handling of a multi-billion-dollar renovation project for the Federal Reserve headquarters, before the investigation was later concluded, which removed an important obstacle to confirming Warsh's appointment as head of the central bank.

While Trump is pushing to lower interest rates, labor market and inflation data show that the Federal Reserve may face stronger justifications for maintaining its strict policy and even raising interest rates if prices continue to rise.

Thus, the upcoming confrontation does not appear to be just a dispute over the interest level, but rather a broader test of the relationship between the White House and the Central Bank, at a time when monetary policy intersects with trade, inflation, and economic growth.