The data centers industry in Israel is on the rise, as the AI revolution gains pace sparking an unprecedented level of new deals. This week Crusoe, one of the five biggest cloud companies in the US, leased about 40 megawatts in the data center being built in Afula by Omer Adam, Maor Melul, and Nessim-Sariel Gaon’s Anan, in a deal that values the company at about NIS 3 billion.
Earlier this month Tzachi Nachmias’ Mega DC acquired the land of the Alliance tire factory in Hadera for NIS 1 billion, on which it will build a, 180 dunam (45 acres) data center. Nachmias' deal heralds a new trend in the data center landscape in Israel: no longer just buying random land to build real estate, but proximity to a high-voltage line and substation, which allows for supply of especially high-power electricity. The expensive deal made by Mega DC in Hadera will allow customers access to about 340 megawatts of electricity in a relatively small area available for logistics.
In 2026, infrastructure and energy companies have also discovered data centers including Keystone Fund, which will build two underground data centers in Be'er Tuvia, with a capacity of 40 megawatts each, adjacent to the IPM power plant. Keystone joined Ofer Yanai's O.Y. Nofer Energy, which is buying land in Shoham to build a 100 megawatt data center, Dalia, which will build a 200 megawatt data center north of Ashdod port, and Enlight, which will build a 100 megawatt facility near its solar field in Ashalim.
Several weeks ago, Doral Energy and Ampa also announced a partnership to build data centers next to power plants. The influx of energy companies into the lucrative field reflects a global trend in which AI giants realize that the obstacle to the industry’s expansion is in energy consumption. Thus cloud giants like Google, Microsoft, and Amazon are seeking electricity, or in extreme cases, even building their own power plants.
Is the hype over-exaggerated
The intriguing question is whether the rush to AI, which requires huge computing power and electricity consumption, has not been blown out of proportion. Many data centers are being built before they have even secured their first customer, which may leave some of them without demand in the long run. Only a few entrepreneurs have so far announced customers renting their data centers, including Mega DC, which is leasing space in Modi'in, Masamia and Beit Shemesh to Nebius, and is planning to build laboratories for Nvidia in the north. Google, Microsoft and Amazon also rent data center space, but their pace of development in Israel is relatively slow compared to their growth in the US and UAE.
"They said: 'You have no chance'"
Will there be demand for the data centers? At least for now, the gamble of Melul, Adam and Gaon seems completely worthwhile. According to estimates, Crusoe will buy 12,000 processors from Nvidia for the space it rented in a cloud complex. In the new contract, the US cloud giant has committed to investing billions of dollars in the facility over the next decade.
The parties refused to comment on the numbers, but according to estimates, Crusoe will spend at least $1.75 billion on the purchase of the processors, plus about $60 million in annual rent and about $70 million in electricity costs per year. So the estimated size of the US giant's investment in the Afula facility could reach $3 billion within a decade.
The decision to invest in data centers was not obvious. When Melul, a native of Afula who became a major real estate developer in the city, purchased a 25-dunam (6.25 acres) lot on the outskirts of the city five years ago for about NIS 80 million, eyebrows were raised.
He tells "Globes," "They told me, 'Why did you suddenly buy land in Afula to build a data center?' They told me there was no way such a structure could be built in such an area. But even then I realized that a data center was no longer a real estate asset, it was like starting a tech company from scratch."
Melul (40) realized that the land was near an overhead power line, and he heard about the construction of Menora-Mvitachim's Tralight electricity project in the nearby Ta'anakim region, which is expected to produce about 300 megawatts. He bet on the huge plot of land before the dawn of the AI era and long before senior developers like Nachmias and Yanai discovered the data center industry.
"The war wasn’t a problem"
The love of Afula not only comes from Melul but also US company Crusoe, managed by Israel by Alon Yariv (29), an entrepreneur who founded Israeli startup Atero, which was acquired by Crusoe for $150-200 million. Yariv was born in Afula and his grandfather was one of the city’s founders.
But the move to Afula is not just for sentimental reasons: Crusoe came to the Anan Group through Polar, the company owned by Nessim-Sariel Gaon’s Lian Group, which built a network of data centers for Bitcoin mining and later converted many facilities to cloud processing and AI. Crusoe leased several dozen megawatts of AI activity at Polar’s facility in Norway, and was looking to establish an operation in Israel.
Yariv is the head of the Israeli operations of Crusoe, a $10 billion company that serves huge clients like OpenAI and Oracle. He was recently appointed VP global business development. Since his company was acquired by the US giant, he has worked to bring its data centers to Israel as part of his personal vision to transform the local computing industry into an exporter of AI processing by building "AI factories," and along the way to get more local companies to use Israeli processing services instead of consuming abroad.
He observes, "Israel has several components that make this vision possible such as electricity available at a reasonable price and in the Jezreel Valley there are temperatures that allow for optimal running of graphics processing units (GPUs) for AI processing not too cold, but not too hot either." However, Yariv notes that the strong shekel is creating an unexpected difficulty in AI processing. "This has actually raised the price of electricity."
Crusoe is one of the biggest neo-cloud companies in the US - a cluster of companies that specialize in buying tens of thousands of graphics processors at once, building AI processing clusters with software and complementary systems, and leasing them to companies interested in AI processing. The company received a $10 billion valuation in a capital raise that closed earlier this year. The two largest companies in the field are CoreWeave, with a valuation of $58 billion, and Nebius, founded by Israelis Arkady Volozh and Roman Chernin, which has a valuation of $37 billion, while Israel's Vast Data, which reached a valuation of $30 billion last week, provides AI processing services.
In this competitive market, Crusoe seeks to differentiate itself by controlling the value chain. The company builds its own power plants in facilities in the US and offers services that include a hardware array needed by AI giants, such as OpenAI, "from electricity to the cloud," and software tools that improve efficiency of graphics processors in computing and running AI agents, and software environments for AI engineers. "Israel is an important part of this journey, and we are committed to growing here alongside the AI ecosystem," the company said.
"The deal was signed during the war with Iran. The partnership we built in Israel with US management allows them to trust us to make the right choices and choose the right partners. We also believe that the situation will improve and that Israel is a place where we will expand our investment."
A protected underground facility
The Anan Group is currently building two data centers in Israel: one in Tzura near Beit Shemesh - a protected complex partially underground for security customers; and the second in Afula, is being built above ground for commercial needs. It began as a project built for 40 megawatts, expanded to 80 megawatts, and is spread over an area of about 40,000 square meters. Now, Anan aims to build about 100 megawatts in the 200-dunam complex. According to market estimates, the cost of building will be about $850 million.
"When we bought the land, they talked to us about four, maybe eight megawatts of projects. It quickly grew to about 32 megawatts, and today we are talking about 200-300 megawatts," says Melul. "Today, gigawatt campuses are being built worldwide, while there are already plans to establish power plants of 5 gigawatts, while Israel’s electricity consumption as a whole during peak hours is 17,000 gigawatts."
Yariv believes Israel should turn its AI centers into the new "oil wells," by exporting AI processing power and subsidizing electricity prices through benefits or paying for electricity in dollars. "All over the world, energy is traded in dollars, this is the new "petro-dollar," and a change in currency rates creates a different dynamic. It is worthwhile for the country to maintain a favorable price for electricity for export because this will bring a profit in the long term through taxes it will collect from AI companies that will operate here."
Published by Globes, Israel business news - en.globes.co.il - on April 28, 2026.
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