Israel Bets on a "Technological Shield": Ambitious Plans for Chip Production and Large-Scale AI Data Centers

Israel is accelerating its strategic efforts to build sovereign infrastructure for artificial intelligence (AI) and semiconductor manufacturing. The goal is for the state to maintain its technological advantage in the region by attracting leading American and Asian corporations.

Erez Ascoli, Director of the National AI Directorate, revealed that negotiations have begun with technology leaders such as Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, and Intel. The focus is on creating a manufacturing hub for state-of-the-art chips with a size of 2 nanometers or less.

Parallel to chip production, Israel plans a massive expansion of data center capacity. The project envisions the creation of a cluster with 100,000 graphics processing units (GPUs) within the next five years – a scale that matches the largest planned facilities in the European Union.

Geopolitical Context and Security
Israel's strategy comes at a time of fierce competition for AI leadership between the US and China, as well as increasing investments from Gulf states (UAE and Saudi Arabia). Ascoli emphasized that Israeli expertise, stemming from the defense industry, is a key asset: "Our strength lies in connecting software with the physical world – algorithms embedded in physical systems."

Despite the ambitions, the project faces serious challenges. The first is the energy crisis – the accumulated requests for new server farms reach 27 gigawatts, which exceeds the country's capacity. The second is the risk of military conflicts, although Ascoli guarantees that so far, no data center in the country has been affected by the current military actions.

Legislative Measures
To support development, the government is preparing a law that will classify data centers as critical infrastructure. This will allow the state to accelerate permitting procedures and ensure that these strategic sites will be protected by air defense systems. Instead of direct funding for infrastructure, the state will offer tax incentives and guaranteed capacity for private investors.