Melissa Otto, head of research at S&P Global Visible Alpha stated that massive investments in artificial intelligence (AI) that underpinned record runs in equities face a major hurdle as the Middle East crisis clouds prospects for growth and energy costs.
S&P Global had said tech giants Microsoft, Amazon, Alphabet and Meta planned to spend about $635 billion on data centers, chips, and other AI infrastructure in 2026 before the Iran war began, a massive leap from $383 billion the prior year, and just $80 billion in 2019.
Otto said that while tech companies have yet to signal cutbacks in those capital investments, persistently high oil prices could force spending revisions in the first and second quarters, bringing a “really meaningful correction in all equity markets.”
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“I think if the capex numbers get pulled back, if in fact energy prices are not reflected in earnings, that could be a catalyst,” she added in an interview in Tokyo on Monday.
While the hype over AI carried global stock indexes beyond the highs of 2025, it has lost steam since the conflict. A recent report by Time also mentioned growing concerns about the potential impact of the war on the AI sector. Many AI data centers, which train AI systems like ChatGPT and process their queries, are powered by natural gas. While the initial resource strain due to the war has been on oil, gas facilities have been targeted in the Gulf. Analysts say they could take months to repair, leading to higher gas prices worldwide. European natural gas prices surged by as much as 30 percent on Thursday.
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Most data centers are in the U.S. which is more insulated from these direct shocks, because the country produces and exports its own natural gas. Paul Kedrosky, an investor and research fellow at MIT’s Institute for the Digital Economy said that most data centers in the U.S. may not see immediate cost increases. “But there could be this ripple effect where workloads get pushed to the U.S., but you can’t add new supply because the backlog queue is already immense, and so there’s a potential for this whole thing to seize up.”
Data centers in the Middle East are also reportedly under direct attack. In addition, the Iran War is also weighing on the private credit industry, which has financed much of the data center buildout.
At the CERAWeek energy conference in Houston last week, oil executives warned supply risks are not fully reflected in prices, Otto said, raising concerns about further increases with ripple effects for the global economy. “We’re seeing this big question around global growth,” Otto added. “Because if you have energy prices jumping 30%, that’s going to hurt consumers, that’s going to hurt companies.”