Israeli Business Leaders Vie for AI Server Farm Dominance
A surge in demand for Artificial Intelligence services has spurred a rush among Israeli real estate, energy, and logistics entrepreneurs to enter the lucrative server farm industry. These massive facilities, costing billions of dollars, house thousands of Nvidia servers essential for processing language models. The sector, once dominated by established players like Levnat family's MAD1, Papushdo family's Serverfarm, and Yossi Shinfeld's SDS, now sees prominent figures such as Ofer Yanai, Tzachi Nechmias, Nadav Laila, Eitan Yochannov, Rami Levy, and even singer Omer Adam investing heavily.
Energy companies like Doral, Enlight, and Nofar, logistics firms like Mega Or, and real estate developers like Kardan-Geva and Empa are actively seeking land and electricity connections for AI farm construction. However, the Israel Electric Corporation (IEC) has cautioned that not all electricity connection requests will be approved, as applications for 27 gigawatts have been submitted, a colossal amount that could strain the national grid and disrupt power supply to other facilities.
A leaked internal document from Noga, the national grid operator, reveals a list of applications from dozens of server farm developers, exposing the ambitions of numerous business leaders. Among them is Hadarin, a real estate company owned by Yitzhak Tshuva's Delek Group, which plans to build a 240-megawatt server farm on 30 dunams near Netanya's train station, with estimated construction and connection costs of $4-5 billion, excluding server expenses. Hadarin also has plans for a smaller 120-megawatt facility in Ashkelon.
Motty Ben-Moche's Blue Square Real Estate has also entered the fray, reportedly applying for a large 223-megawatt server farm in Be'er Tuvia, requiring billions in investment. Separately, real estate developer Shuki Sharon and law firm S. Friedman have jointly applied for a massive 560-megawatt facility in the Negev called Mega South. Doral and Empa are planning a $4-5 billion, 96-megawatt farm near Beit Shemesh on land owned by Nadav Laila.
While Tshuva and Ben-Moche are making cautious entries, Tzachi Nechmias and Yossi Shinfeld appear to be the most aggressive players. Nechmias's company, Mega DC, has applied for approximately 12 gigawatts of electricity connections, nearly half of those listed in the leaked document. Shinfeld's SDS has applied for nearly 2 gigawatts. These extensive applications are likely a strategy to navigate Noga's lengthy and unclear approval process, with the expectation that only a fraction will be granted.
Industry sources anticipate that the current halt on electricity approvals until year-end will lead to clearer criteria, potentially favoring energy companies building power stations adjacent to server farms. However, legislative amendments are needed to allow power stations to directly supply server farms, a process delayed until after the upcoming elections. Current regulations require separate grid connections for both facilities, limiting direct power supply to large server farms.
