Inside Wealth: Markets Are Underpricing the Risk of Middle East Pullback in AI, Says Tech Investor Jack Selby

Why It Matters

A pullback from the region would tighten AI capital flows, pressuring valuations and slowing infrastructure rollout, while Selby’s geographic shift highlights emerging opportunities beyond over‑saturated coastal clusters.

Key Takeaways

• Middle East funds represent ~25% of AI capex over next five years
• Prolonged Iran conflict could pull $100‑$200B from AI projects
• Selby’s new VC fund targets non‑coastal startups to avoid overvalued hubs
• AI over‑investment risk may cause bubble losses exceeding $100B
• Oracle, Nvidia, Cisco partner on 5GW UAE data‑center for OpenAI

Pulse Analysis

The Middle East has become a pivotal source of AI capital, with sovereign‑wealth funds from the UAE, Saudi Arabia and other Gulf states earmarking roughly 25% of global AI investment for the next half‑decade. Analysts estimate that a sustained Iran conflict could divert $100‑$200 billion from AI projects, especially data‑center builds that are critical to the growth of firms like OpenAI, Oracle and Nvidia. This regional exposure adds a geopolitical layer to the AI funding landscape, meaning market participants must monitor both war‑related risk and the broader macro‑economic environment.

Beyond geopolitical concerns, the AI sector faces a classic over‑investment dilemma. The top hyperscalers are slated to spend more than $700 billion this year on AI infrastructure, fueling a frenzy that echoes the dot‑com bubble of the late 1990s. Selby warns that a correction could wipe out tens, if not hundreds, of billions, dwarfing previous tech busts. Investors are therefore urged to scrutinize valuation multiples and diversify away from overly concentrated bets, especially in regions where funding may evaporate quickly.

Selby’s response is to look beyond the traditional venture hotspots of California, New York and Massachusetts. His new Copper Sky fund will target promising startups in the remaining 47 states, where capital is cheaper and competition less intense. At the same time, family offices are increasingly tempted to make direct investments, despite limited expertise, as they grow frustrated with underperforming VC funds. Selby advises disciplined capital allocation and cautions that many family offices lack the skill set to assess and restructure private tech companies, underscoring the need for professional fund partners in a volatile AI market.