Microsoft’s $1B Kenya data center meant to thwart China stalls amid geopolitical, commercial tensions

A $1 billion geothermal-powered data center project in Kenya, announced by Microsoft and UAE’s G42 in May 2024, has stalled despite its strategic importance in the US-China tech competition for African digital infrastructure. The project was designed to leverage Kenya’s abundant geothermal energy and serve as a blueprint for loosening Beijing’s grip on the continent’s tech ecosystem, but developers have yet to break ground with the original May 2026 deadline fast approaching.

The big picture: The Olkaria data center represented a geopolitically motivated partnership between three nations—the US, UAE, and Kenya—aimed at countering China’s dominance in African digital infrastructure, where Huawei, the Chinese telecommunications giant, has built around 70% of the continent’s 4G networks.

Why it stalled: Fifteen months after the deal was announced, the companies are still struggling to identify a sustainable business model and clear use cases for Microsoft’s cloud services beyond the Kenyan government’s commitment.

• “It all came together in a very geopolitical way,” a tech infrastructure financier involved in the project told Semafor. “The UAE government was scrambling to give the US something to make up for their previous dalliances with Huawei.”
• The relatively low purchasing power of Kenyan consumers makes it difficult to justify a 1-gigawatt data center from a purely commercial perspective.
• Kenya’s government, while tech-savvy with 13.7 million eCitizen platform users, is struggling with ballooning debt and may not represent a valuable enough customer for Microsoft.

What you should know: The project emerged from complex geopolitical maneuvering that saw G42, an Abu Dhabi-backed AI conglomerate, sever ties with Huawei in late 2023 to gain access to US-made chips.

• This led to Biden approving cutting-edge chip exports to Abu Dhabi and Microsoft investing $1.5 billion in G42.
• The announcement coincided with Kenyan President William Ruto’s historic state visit to the US in May 2024—the first by an African leader in 16 years.
• The UAE has become among the largest foreign investors in Africa, surpassing China in total announced investments.

Trump administration priorities: The change in US leadership has shifted focus away from emerging markets like Kenya toward advanced economies and larger-scale domestic projects.

• Trump’s AI strategy encompasses the $500 billion Stargate venture with OpenAI, Oracle, and SoftBank for US data centers.
• Recent deals include $200 billion with the UAE for the largest AI campus outside the US and $42 billion with Britain for AI and quantum computing.
• A White House official said the administration’s focus has been on the Gulf and Europe, with Africa not seen as an urgent battleground in the tech war with China.

China’s advantage: Beijing’s approach to African digital infrastructure differs fundamentally from Western commercial models.

• Huawei has established itself as an attractive partner by providing infrastructure at significantly lower prices than Western competitors.
• Chinese companies have invested in digital skills training and worked closely with governments to quickly deliver large-scale projects.
• Beijing decided that investing in African digital infrastructure through state-linked companies was in its long-term strategic interests, regardless of immediate profitability.

The opportunity that remains: Kenya’s tech-savvy population and government digitization needs still present compelling use cases.

• Kenyans use ChatGPT at the highest rate in the world, according to July research.
• Digitalizing government records across services—from education to health, land registration to tax records—represents a significant opportunity.
• Kenya’s state-run power firm has set aside 342 hectares for a “green energy park” to support the data center and other industrial enterprises.

What they’re saying: Even at the project’s announcement, officials acknowledged its unusual nature.

• “This partnership is bigger than technology itself,” President Ruto said, calling it a “coming together of three countries with a common vision.”
• G42’s CEO Peng Xiao told the Financial Times: “For better or worse, as a commercial company, we are in a position where we have to make a choice. We cannot work with both sides. We can’t.”

Broader context: The stalled project reflects wider challenges in Big Tech infrastructure spending, with Microsoft having “slowed or paused” some data center construction earlier this year, including a $1 billion project in Ohio, though recent deals suggest renewed momentum with a $4 billion Wisconsin data center announced in September.