Markets are underpricing the risk of Middle East pullback in AI, says tech investor Jack Selby
Tech investor Jack Selby warns that markets are underestimating the risk of Middle East funding withdrawals from AI projects due to regional volatility, which could disrupt data centers and global investments. He also cautions that the AI sector may be in a bubble fueled by overinvestment, potentially leading to losses far exceeding those of the dot-com crash. Selby advocates investing outside major tech hubs and criticizes family offices for making undisciplined direct investments without proper expertise.
- ▪Half of Middle East AI funding supports regional data centers, making them vulnerable to geopolitical disruptions.
- ▪Selby predicts the AI bubble, if it bursts, could result in tens or hundreds of billions in losses, dwarfing the dot-com bust.
- ▪He is launching a new fund focused on tech investments outside California, New York, and Massachusetts to find undervalued opportunities.
- ▪Many family offices are making direct private investments due to frustration with underperforming venture capital funds.
- ▪Selby argues most family offices lack the training and discipline needed for successful direct investing in tech startups.
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Selby estimates that half of the Middle East's AI funding is dedicated to data centers located in the region. The other half is allotted to projects and data centers worldwide. Middle East funds and companies have already started canceling various shipping and business contracts by invoking force majeure, he said. The big risk is that they start canceling data centers as well."Markets don't seem to grasp that this is a very real situation," he said. "It's very volatile. I hope and I pray that it goes back to some semblance of normalcy soon. But it seems to me that markets are underpricing this volatility and the risk."Beyond the war, AI also faces a broader risk of overinvestment and speculation, Selby said.
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