NEOM Cancels Billions in Contracts as Saudi Arabia's Flagship Smart City Pivots From Utopian Vision to Data Center Hub
Saudi Arabia terminates over $6 billion in NEOM contracts in March 2026, scaling The Line from 170 km to 2.4 km and pivoting the megaproject toward AI data center infrastructure.
A Wave of Cancellations
In the final weeks of March 2026, NEOM — the $500 billion Saudi megaproject that promised to redefine urban life — terminated a string of major construction contracts worth a combined $6 billion or more, marking the most significant wave of cancellations to hit the project since the Public Investment Fund began reviewing giga-project spending in 2024.
Italian contractor Webuild confirmed on March 25 that NEOM exercised termination for convenience on its $4.7 billion contract covering three dams, a freshwater lake, and the architectural structure known as “The Bow” at the Trojena mountain resort. At the time of termination, the works were approximately 30 percent complete, with a remaining backlog of roughly 2.8 billion euros. Webuild stated that all costs incurred through the termination date, including site disengagement and demobilization, would be reimbursed by the client.
Days later, Malaysian steel specialist Eversendai received notice that its structural steel contract for the Trojena ski village was terminated effective March 26. Bloomberg reported the cancellation as part of a broader pattern of contract terminations across the project. Earlier in the month, on March 12, South Korean firm Hyundai Engineering & Construction — working in a consortium with Samsung C&T and Greece-based Archirodon — received formal notice ending a roughly $1 billion tunneling contract at the heart of The Line. The scope of that contract covered more than 28 kilometers of underground infrastructure, including separate tunnels for high-speed passenger and freight rail systems.
From 170 Kilometers to 2.4
The contract cancellations are the sharpest expression yet of a project in full retreat from its original ambitions. When Crown Prince Mohammed bin Salman unveiled The Line in 2021, the vision was staggering: a 170-kilometer mirrored linear city, 500 meters tall, housing nine million people by 2045 with zero cars, zero streets, and zero carbon emissions.
By early 2026, that vision has shrunk dramatically. The population target for 2030, originally set at 1.5 million, has been revised down to fewer than 300,000. Only approximately 2.4 kilometers of foundation work have been completed. The broader 170-kilometer goal has been deferred indefinitely, with officials now framing the initial 2.4-kilometer phase — which would still make it the longest single building in the world — as a standalone milestone rather than the first segment of a continental-scale structure.
The Trojena ski resort, which was selected to host the 2029 Asian Winter Games, has also been placed in limbo. Saudi Arabia confirmed the indefinite postponement of the games in January 2026, removing one of the project’s most visible international commitments. The separate Mukaab project — a massive cube-shaped structure planned for Riyadh — has also been cancelled due to cost concerns.
The Fiscal Reality
The scale-back reflects a collision between NEOM’s extraordinary cost trajectory and Saudi Arabia’s fiscal constraints. Bloomberg Economics has estimated that Saudi Arabia needs oil at $96 per barrel to balance its national budget, and significantly more to fund the Crown Prince’s constellation of Vision 2030 megaprojects. As of late 2025, Brent crude was trading just above $60 per barrel, well below the break-even threshold.
The financial strain is compounded by competing priorities. Saudi Arabia is simultaneously preparing infrastructure for the 2030 World Expo in Riyadh and the 2034 FIFA World Cup, both of which carry their own multi-billion-dollar price tags. The Public Investment Fund, valued at nearly $1 trillion, has reportedly approved budget cuts of up to 60 percent for some NEOM-related projects as it redirects capital toward events with hard international deadlines.
NEOM itself has been considering significant workforce reductions, with reports in mid-2025 indicating that more than 1,000 employees could be relocated to Riyadh as part of a restructuring. The project’s CEO departed amid the turmoil.
The Data Center Pivot
What is emerging in NEOM’s place is something far more pragmatic than a utopian linear city. Saudi officials have begun positioning the site as a potential hub for AI data center infrastructure, leveraging NEOM’s coastal location and access to abundant seawater for cooling — a critical operational requirement for large-scale compute facilities.
This pivot aligns with a broader strategic reorientation. Saudi Arabia’s economy minister has stated publicly that the kingdom is “reprioritizing a little bit towards sectors that need it the most, and today it’s technology, artificial intelligence,” signaling a shift from architectural spectacle toward industrial technology infrastructure. The existing earthworks, power infrastructure, and logistics networks already built at the NEOM site could provide a foundation for data center campuses without requiring the kind of unprecedented engineering that The Line demanded.
What NEOM’s Contraction Signals
NEOM’s trajectory offers a case study in the gap between smart city ambitions and execution realities. The project was conceived during a period of high oil revenues and peak enthusiasm for technology-led urban reinvention, when digital twins, autonomous transit, and zero-carbon megastructures were presented as achievable within a single development cycle.
The reality has proven more resistant. Professor Mike Cook of Imperial College London told Newsweek that “building something of such a scale within a few years is unrealistic,” a judgment that now appears validated by the project’s own timeline revisions. The challenges were not only financial but logistical: sourcing materials at the required scale (one estimate suggested the project had consumed approximately 20 percent of the world’s available steel), managing a workforce of tens of thousands in a remote desert location, and coordinating engineering feats that had no precedent.
The pivot to data centers, while less visually dramatic, may prove more durable. Global demand for AI compute infrastructure is growing rapidly, and Saudi Arabia’s sovereign wealth, geographic position, and energy resources give it genuine competitive advantages in that sector. Whether NEOM becomes a footnote in smart city history or the foundation of something more practical will depend on whether this latest reinvention can close the gap between ambition and delivery that defined its first chapter.