The AI Revolution's Impact on Israel's Data Infrastructure: Energy, Security & Hyperscalers with Itay Borenstein

Itay Borenstein on Israel's data center boom: driven by AI, shaped by security and power constraints, with limited green energy adoption

Israel's position as a global tech leader is fundamentally dependent on its ability to build a next-generation data center ecosystem, but this growth is being shaped less by sustainability and more by the immutable constraints of energy, security, and foreign investment.

This reality is at the core of our discussion today with Itay Borenstein, CEO and Co-Founder of ChatRM and Head of Operations at NanoTherma; an expert on Israel's digital infrastructure. We'll explore how surging demand for cloud and AI services is pushing the limits of power availability, how national security dictates where data centers are built, and why international hyperscalers are becoming the dominant force in the market.

Interview with Itay Borenstein

How is Israel’s growing demand for cloud services and digital infrastructure shaping the development of new data centers?

Israel’s growing reliance on cloud computing is driving rapid data center expansion. Demand for secure and reliable infrastructure has surged, with companies like Alexander Schneider, MedOne, and MagalCom leading the colocation market, while hyperscalers such as NVIDIA and AWS establish large-scale facilities. As in other regions, Israel is moving toward more advanced, larger, and more efficient data centers to meet rising needs for connectivity, storage, and computing power.

What are the main challenges data center operators face in Israel, such as land availability, power supply, or cooling requirements?

In Israel, one of the most pressing challenges for data center operators is ensuring a stable and sufficient power supply. As data centers become increasingly energy-intensive, particularly with the rise of AI and GPU-driven workloads, the demand for electricity is outpacing the country’s current infrastructure. Every watt of consumption matters, making efficiency critical.

At the same time, cooling systems need to become more advanced and cost-effective to handle the growing thermal loads, especially in facilities supporting high-performance computing and AI services.

How do local regulations and government policies affect the establishment and expansion of data centers?

Israel, national security concerns have a strong influence on data center development. Facilities are often required to be built underground and located in rural areas to reduce vulnerability and ensure resilience in the event of conflict or emergencies. These regulations significantly shape both the siting and design of data centers, adding complexity to their establishment and expansion.

In what ways is cybersecurity, given Israel’s tech ecosystem, becoming a differentiating factor?

Israel’s cybersecurity ecosystem is among the strongest in the world, with a thriving industry that continuously produces advanced solutions and talent. This makes Israel a uniquely secure environment for operating data centers, significantly reducing the risk of cyber breaches. The presence of world-class cybersecurity firms and expertise ensures that data centers can maintain resilience and trust, which is increasingly vital as threats grow more sophisticated.

How are sustainability requirements and energy efficiency influencing the design and construction of new data centers in the country?

At present, sustainability requirements and energy efficiency have only a limited influence on the design and construction of new data centers in Israel. This is largely because the government has not yet prioritized renewable energy integration at scale, currently, only about 3% of the country’s energy supply comes from renewable sources.

Despite this, Israel has built a strong ecosystem of innovative startups in clean energy and sustainability, like NanoTherma. These companies are creating promising technologies, but the impact on mainstream data center design remains modest for now.

What role do international players and foreign investment have in driving the future growth of Israel’s data center industry?

International players play a pivotal role in shaping the future growth of Israel’s data center industry. Hyperscale providers are steadily increasing their presence in the country, establishing new research hubs, expanding cloud infrastructure, and building advanced facilities.

These investments not only enhance R&D capabilities but also strengthen sales operations and overall performance, positioning Israel as a key node in the global digital economy.