The competition to build data centers in Israel for processing AI is heating up. Today Mega Or (TASE: MGOR), managed by Zahi Nahmias, and Nebius, owned by Arkady Volozh, launched their data center for processing AI in Modi’in.
This is the largest AI computing facility in Israel, 25% of which will be allocated to the Israel Innovation Authority for the operation of the national supercomputer. The center, which provides AI processing using eight megawatts electric power, contains 4,000 Nvidia graphics processors costing about $300 million, and its construction cost was estimated at $80 million. The Modi’in data center is not the only one. In recent weeks, as part of the growing competition to provide AI services, SDS, owned by Yossi Sheinfeld, together with Israeli unicorn Vast Data, also launched a data center in Beit Yehoshua near Netanya, which houses about 2,000 Blackwell (B200) processors.
Three more data centers on the way
Competition for providing AI processing services to government ministries, private companies and the defense sector in Israel is expanding by leaps and bounds, with Mega Or planning to build another data center, several times larger than the one in Modi’in, in Beit Shemesh. It will be built to operate with an electrical capacity of up to 220 megawatts within about a decade at a site in Beit Shemesh, on a plot of land adjacent to the cement plant.
The company is already carrying out work to prepare the ground at the site for the construction of 10% of the potential capacity of the center, about 20 megawatts at a cost of $200 million. The data center will initially be able to accommodate 20,000 graphics processors, five times the number currently occupying the data center in Modi’in, although the tenant in Modi’in, Nebius, also plans doubling the number of processors on site to 8,000, subject to demand.
If demand for the Beit Shemesh site proves to be strong, Mega Or could continue to invest in the center up to a maximum of 220 megawatts by 2035. The data center itself is large, potentially spanning 54,000 square meters, and its construction cost is expected to exceed $2 billion over a decade. In the near term, Mega Or is building three smaller data centers. The center in Modiin will be expanded by 7,000 square meters at a cost of NIS 150 million, a new data center will be built in Yoav Park in the south on an area of 20,000 square meters at a cost of NIS 350 million, and in Haifa, a 14,000 square meter data center is planned at a cost of about NIS 200 million.
At the Beit Shemesh site, Mega Or is also currently building a substation that will supply high-voltage gas-based electricity to the region at a capacity of 200 megawatts. It also announced last summer that it would build, together with Ashtrom and Har-Tov Cement, a power plant called Shimshon, which will produce 830 megawatts of electricity and incorporate storage facilities to help supply electricity during peak hours. The investment in the plant will amount to about $1 billion and is part of the company’s strategy to build power plants alongside data centers.
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The two biggest players in Israel’s AI data centers sector, Mega Or and SDS, entered the field after expanding from the logistics facilities sector. Mega Or entered the field last year, while SDS is a pioneer in cloud computing data centers, and already houses Microsoft and Google’s Israel operations. Israel, however, lags behind the world in the pace of deploying graphics processors for AI processing.
While the national supercomputer was inaugurated just this morning with only about 1,000 graphics processors, the remaining 3,000 processors will be privately leased. This pales in comparison to leading countries in the world: Last month, Nebius’ British competitor, Nscale, announced plans to deploy 300,000 Nvidia processors in the long term, and to build a supercomputer in the UK. Earlier this month, the US approved the UAE importing 500,000 Nvidia processors this year.
Electricity shortage: No targets or incentives
In Israel, AI data center planners are facing an electricity shortage, and they claim there is no government planning that takes their needs into account and that the state is delaying the licensing of storage facilities that are essential to reducing costs.
MK Orit Farkash-Cohen, former Electricity Authority chair and current chair of the Knesset AI Committee, says, “AI systems consume enormous amounts of electricity and the trend is only increasing. However, while countries like the US, China and European countries are busy promoting plans to accelerate support for establishment of electricity infrastructure that will meet the governments’ goals of building data centers and AI infrastructure, Israel is lagging behind.”
She said, “There is no quantitative target adopted for the implementation of AI computing power, and hence there are also no energy targets derived from this in the long term to promote these goals. Everything relies on the existing construction of data centers without marking a quantitative and substantive target that is desirable for Israel to establish and restore its position in the field. The government must also establish supportive and incentive arrangements in the energy field – whether through easing connection times, designated allocations, storage, incentives – to promote the field and ensure that Israel works to secure energy sources. The Ministry of Finance has issued an initial call on the subject, but it must be urgently supplemented with an implementation plan and clear targets.”
Published by Globes, Israel business news – en.globes.co.il – on October 20, 2025.
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