Oracle shelves plans to build data center in Israel

The American technology giant Oracle (NYSE: ORCL) was one of the first companies to rent a powerful underground data center in Israel to provide its clients – banks, health funds and defense forces, with artificial intelligence processing, data management and information storage services. Even before Microsoft, Amazon and Google built data centers in Israel, in 2019 Oracle decided to bet on the local market and rented four floors of an underground data center in Har Hotzvim in Jerusalem. The 14,000 square meter facility consumes 8 megawatts of electricity per hour.

In recent months, Oracle has begun studying the feasibility of building a much larger, 30-megawatt data center to process artificial intelligence and complex computer operations that require high-performance computing (HPC) infrastructure. The cost of building the data center is more than $250 million, and one of the locations being considered for the facility is Israel.

Meanwhile, Oracle is also considering other locations including Greece, Saudi Arabia and the United Arab Emirates. Globes learned that Oracle, run by Israeli CEO Safra Katz and CTO Larry Ellison, who is close to Prime Minister Benjamin Netanyahu, chose to build the large data center in the Emirates. The final decision in this regard has not yet been made, but the possible preference for the UAE indicates the fear of international technology giants to commit to building large projects in Israel during the war. Some companies are waiting for the war to end while others have already moved to other regions.

Oracle’s management is particularly pro-Israel, and its leaders have spoken several times in the past about expanding their operations in Israel. In 2021, Katz, who was born in Israel and grew up in the United States, told Globes that unlike Google or Amazon, an employee who is dissatisfied with the company’s cooperation with Israel has no place in the company.

She also stressed the importance of building an Israeli data center that serves the local market and eliminates dependence on foreign companies that serve Israel remotely. Ellison, who hosted Netanyahu at his Hawaiian mansion when he was opposition leader in 2022, is believed to have once offered Netanyahu a place on Oracle’s board.

Tech giants are hiring in Israel

The global appetite for consuming AI services has led technology giants to build mainframe computers at an increasing pace. These are huge buildings where hundreds of server cabinets are placed, connected to each other to form powerful supercomputers. Even before the AI ​​revolution, giants such as Amazon, Google, and Nvidia leased tens of thousands of square meters of data center space in the Sharon, Modiin Shoham, and Beit Shemesh areas, in order to closely serve banking and insurance. Companies, health funds and government ministries as part of expanding their cloud operations in Israel.

Meanwhile, despite the war, the demand for cloud computing in Israel is growing, and it is estimated that more than a dozen data centers are currently being built in Israel with a capacity of tens of megawatts each, by companies such as Anan, Schinfeld Engineering, and Med. -1, and EdgeConnex. Cardan, to meet the growing demand and increase computing and processing power.

At the same time, the increase in the use of AI since the launch of ChatGPT at the end of 2022, among cloud companies that provide the technology and domain infrastructure – including Oracle, Google, Microsoft, Amazon and Nvidia – has sparked a particular need for data centers on spaces of up to 15 acres, with Power consumption up to 200 MW. Therefore, even building a data center that consumes 30 megawatts needs the option to expand to 64 megawatts and perhaps even 100 megawatts in the future.

A data center executive, who preferred to remain anonymous, said: “In Israel, it was not difficult to find territories and electrical infrastructure for small eight- or twelve-megawatt data centers in the cloud sector, but AI processing facilities are in a completely different situation. There are not enough areas in Israel near the electrical infrastructure that can provide what is needed today for a 100 MW center, for example, which requires 12.5 to 15 acres, and to this must be added the new requirements for cloud giants to build data at least 50 kilometers away. From the northern border and Gaza, which borders it with expensive land in the center of the country with prices ranging from 6 to 8 million shekels per 1,000 square meters. Electricity prices in Israel are 25% higher than in the United Arab Emirates and 100% higher than in Saudi Arabia All of this makes AI infrastructure projects less viable in Israel.

Another senior executive said: “In the era of artificial intelligence, the need to locate a data center close to the market has become less important and therefore it can be built almost anywhere allowing for lower operating and ownership costs, i.e. operating and service costs. Electricity and taxes, in addition to that AI servers are water-cooled, so it doesn’t matter whether the data center is located in a hot country like the UAE or Saudi Arabia.

To all this we must add the fact that during the war, the major cloud companies halted their new commitments to Israel. Those who were in talks to build new buildings – they put them on hold. Those asked to expand their operations in Israel – such as Amazon or Microsoft – have done so on the basis of their existing infrastructure. Many of them have planned large projects here with the expectation that Israel will become the central connection point for fiber optic cables between Asia, the Middle East and Europe. But the deployment of two major fiber-optic cables that were supposed to pass through Israel — Centurion and Google’s Blue Raman — has been put on hold due to the war in Israel and the Houthi threat in the Red Sea. According to estimates, the arrival of the ship that was supposed to connect the blue cable from Greece to Israel has been postponed for at least a year.

Investing government money

Not only does the UAE tend to offer cheap and abundant land and electricity at low tariffs, but it also invests billions of dollars in government funds to attract tech giants. The massive G42 fund, which has raised about $1 billion from the UAE’s Mubadala Wealth Fund and the US fund Silverlake, recently raised another $1.5 billion from Microsoft, to jointly build two large AI data centers in the country. G42 itself is busy purchasing thousands of graphics processors for the country to build AI computing infrastructure, and has signed a deal with Nvidia’s competitor, Cerebras, to purchase processors worth more than $1 billion.

Since 2017, with the support of the UAE Minister of Artificial Intelligence, Omar Al Olama, the Translation Studies Institute has been operating in the country and is behind the successful falcon language model. With a government investment of hundreds of millions of dollars, it challenges Meta and Mistral in powering AI models. The company has brought to Abu Dhabi hundreds of artificial intelligence experts from Europe and the United States. But in Israel, there are no incentives to build data or computing centers in the field of artificial intelligence. The government’s AI program currently only has about $130 million in funding through 2027.

Since Oracle leased land for its data center in Jerusalem from Benat in 2019, it has not expanded its operations in Israel, although its plans to lease land in an underground Med-1 data center in Tirat Carmel did not ultimately materialize. In March, Ellison outlined the company’s data center construction plans and said Oracle intends to spend $10 billion on building computing facilities in 2025, including “large AI centers in a total area where eight Boeing 747 planes could park.” “It will create massive amounts of data capacity in the next two years.”

Eran Feigenbaum, head of Oracle in Israel, said in response to the report: “Oracle does not have to choose between the UAE, Israel and Saudi Arabia. We build where we have demand and that is why all of these countries already have data centers. The second place for Israel will be Build it and our work in Israel will remain strong.”

Published by Globes, Israel Business News – en.globes.co.il – on October 10, 2024.

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