New in AI

◆ THE EXCHANGE · Infrastructure

The UAE spent years getting permission to buy advanced AI chips. Powering them is the longer wait.

A data centre with its chips installed still cannot switch on without a power transformer, and in the US the order book for those runs about 30 months.

Chandni Melwani

Chandni Melwani

Founder & Editor

Aug 20, 2026 · 2 MIN READ

A large grey power transformer in an electrical substation GCC Photo: American Public Power Association / Unsplash

The News

A global shortage of power transformers threatens the buildout of AI data centres across the Gulf, analysts told AGBI on August 17, 2026. Power transformers step grid voltage down to a level a data centre can use, and no facility can be energised without them. In the United States, delivery now averages about 30 months against roughly 12 months before 2020, according to the Wisconsin AI Infrastructure Initiative. GCC buyers order from the same suppliers as US and European hyperscalers — among them Hitachi Energy, Siemens Energy, GE Vernova, Hyundai HI and Hyosung — all of which are reporting multi-year backlogs. The GCC has more than 170 active and planned data centre projects worth over $93bn, according to MEED, and the same transformers are needed to connect the region's renewable energy projects to the grid.

Know More

  • — The component: a power transformer steps electricity down from transmission voltage to the level a data hall's servers and cooling can draw. Each one is built to a site's specification, not bought off a shelf.
  • — The wait: about 30 months in the US (128 to 143 weeks), against roughly 12 months before 2020, per the Wisconsin AI Infrastructure Initiative. NERC recorded lead times crossing 120 weeks in 2024.
  • — Why supply cannot flex: transformer cores require grain-oriented electrical steel, produced by a small number of mills worldwide. Its price has roughly doubled since 2020 and copper has risen more than 50%.
  • — The demand side: Wood Mackenzie puts US transformer demand growth at 41% to 116% depending on type between 2019 and 2025, with the resulting supply shortfall measured at more than 30% for 2025.
  • — Already visible in the Gulf: Saudi imports of transformers above 10,000 kilovolt-amperes are up more than eightfold in value since 2021, according to Wood Mackenzie's Ben Boucher, mostly on volume rather than price.
  • — The competing claim: the GCC's 2030 renewable energy target of nearly 165GW is estimated to need about $60.7bn more in investment, per Rice University's Baker Institute, and connecting it requires the same units.

A power transformer ordered in the United States today arrives in about 30 months. Before 2020 it took roughly 12. That unit — a custom-built steel-and-copper block, usually sitting in its own substation, that steps grid voltage down to something servers can run on — is the part a data centre cannot open without, and analysts told AGBI on August 17 that the same order books are now setting when Gulf AI facilities can be switched on.

Three demand waves arrived together — AI construction, industrial electrification and the replacement of ageing grid equipment — and supply could not follow. Transformer cores need grain-oriented electrical steel, made by a small number of mills worldwide, and its price has roughly doubled since 2020.

What follows is a queue rather than a market, and a queue does not clear by paying more. Hitachi Energy, Siemens Energy, GE Vernova, Hyundai HI and Hyosung are among those working through multi-year backlogs from American and European buyers. “That global queue is effectively rationing what’s available for GCC projects too, even though GCC demand is growing at a relatively slower pace,” said Hassan Zaheer of the Abu Dhabi research firm PTR. Saudi imports of the largest units are already up more than eightfold in value since 2021, per Wood Mackenzie.

The region is also bidding against itself. Those transformers connect solar and wind farms to the grid as readily as data halls, and the GCC’s 2030 renewables target of nearly 165GW is estimated to need another $60.7bn. Local manufacturing is coming, Zaheer said, but new capacity takes one to two years to stand up.

Access to American chips was the constraint the Gulf spent years arguing over, and it won that in July when Washington upgraded the UAE to A:5, licence-free for approved buyers. The one that decides opening dates was forming in a factory queue nobody had joined.

Related

#Data Centres#Gulf#UAE#Saudi Arabia#AI Infrastructure#Supply Chain#Energy

Frequently Asked Questions

What does a power transformer actually do in a data centre?

Electricity travels long distances at very high voltage because that is the efficient way to move it, but servers run on low voltage. A power transformer sits between the grid and the facility and steps the voltage down in stages. Until it is installed and energised, a completed building with racks, chips and cooling in place still cannot draw power.

Why does a shortage in the United States affect Gulf projects?

Because it is one global order book. The GCC does not manufacture these units at scale and buys from the same handful of suppliers serving American and European hyperscalers. PTR's Hassan Zaheer told AGBI that the global queue is effectively rationing what is available for GCC projects, even though demand in the region is growing more slowly.

Can the region build its own transformer factories?

There is a push to localise production, according to PTR, but any new capacity takes at least one to two years to come online before it makes its first unit. That is a 2028 answer to a constraint that is binding now.

Sources

Chandni Melwani

Chandni Melwani

Chandni Melwani is the founder and editor of New in AI, covering AI agents, M&A, and enterprise adoption. She holds a Master's in Management of Artificial Intelligence from Queen's University and brings a practitioner's perspective from her work in Data and AI leadership.

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