AI dreams in the Caucasus

This is where the future will be created: the AI9 start-up campus in Yerevan

The showcase project is a data center, not a chip factory. The AI cloud provider Firebird, based in San Francisco and Yerevan, is building it in Hrazdan, central Armenia, with support from the Armenian government and processor manufacturer Nvidia. It began operations in August with around 6,000 chips. By the end of 2027, the AI system is expected to grow to more than 70,000 chips and 300 megawatts. Firebird wants to rent most of the capacity to customers worldwide such as the AI search engine Perplexity and thus establish its Armenian branch as an export platform for AI.

The fact that the USA approved the export of the chips apparently also had foreign policy reasons. The Wall Street Journal reported in early September that US negotiators had used the prospect of Nvidia chips to advance the preliminary agreement between Armenia and Azerbaijan reached in Washington, D.C. in August 2025. After its completion, the export of tens of thousands of additional chips was approved. The Armenian government speaks of a “peace dividend.”

Armenia was considered the “Silicon Valley of the USSR,” long before the Internet existed. But after 1991 the economy and industrial research collapsed.

Armenia was already the smallest republic in the Soviet Union, but one of the top addresses for electronics. Researchers at the Yerevan Institute of Computer Research and Development developed mainframe computers and electronic components for the Soviet bloc. The country was considered the “Silicon Valley of the USSR” long before the Internet existed. But after 1991 the economy and industrial research collapsed. For decades, Armenia lived mainly from raw material extraction, agriculture and services.

The closed borders with Türkiye and Azerbaijan make trade more difficult, even though new transport routes are now being negotiated with both countries. At the same time, Armenia is balancing between Russian, Iranian, European and US interests. The country is now trying to build on the scientific and technical tradition and develop into a leading location for artificial intelligence. Digital services can also be exported without open borders.

The government created a dedicated Ministry of High-Tech Industries in 2019, which promotes IT start-ups through tax incentives and targeted research subsidies. In April this year, it unveiled plans to expand semiconductor research and train more engineers. The schools have also long been involved. Since 2014, the Armath educational project has been setting up school laboratories for robotics, programming and 3D modeling throughout the country. Since the beginning of the school year, public schools have had access to the specialized AI platform Chat GPT Edu.

The results of this strategy are now measurable. The IT industry contributed around seven percent of gross domestic product in 2024 and is growing by more than 20 percent annually. In 2025, the ministry had around 12,000 employees, including smaller IT companies, and 41,000 employees. Armenia also has an internationally successful AI company founded in the country, the image editing software Picsart, with millions of users worldwide. “Armenia is currently the leading country in AI development among the former Soviet states,” says Arik Akhverdyan in an interview with Jungle World. He is the managing director and co-founder of the AI9 start-up campus in Yerevan, where founders, investors and engineers work on new AI companies.

Russia's war of aggression against Ukraine brought a boost in the IT sector in 2022. At least 500 Russian IT companies moved their headquarters to Armenia or opened offices there.

Russia's war of aggression against Ukraine provided a boost in 2022. According to the US trade authority ITA, at least 500 Russian IT companies moved their headquarters to Armenia or opened branches there. Thousands of professionals with experience in data processing, cybersecurity and financial technology followed. The large diaspora and their financial resources are also an important factor. It is estimated that more than seven million people of Armenian origin live abroad, particularly in California, home of the US technology industry. The software provider Servicetitan was founded in Glendale there and went public at the end of 2024 as the first IT company founded by Armenian emigrants. Since 2011, the Tumo Center for Creative Technologies in Yerevan has been offering young people free courses in technology and design, set up and funded by the US diaspora.

Armenia took an important step in June. The Armenian branch of the US company Microchip Technology received an export license from the US Department of Commerce for the development of semiconductor technology. The rarely awarded license is related to a US-Armenia agreement on AI and semiconductors signed in August 2025. Access to modern chip technology is also a political question because licenses are revocable.

Own production is also to be created: a factory for the Singapore company Levi Semiconductors for multi-component semiconductors and silicon photonics chips is planned. However, the project is hardly aimed at competing with the large Asian chip factories and their enormous investments. The chips for the new Nvidia data center in Hrazdan are not manufactured in Armenia, but by the Taiwanese company TSMC. The project is primarily an attempt to build computing capacity in the country. It follows on from the National Academy of Sciences Supercomputer Center, which opened in 2024.

Around 37 percent of Armenia's electricity came from natural gas imports from Russia and partly Iran, and 30 percent comes from the Mezamor nuclear power plant.

The IT boom has not yet solved the structural problems. The World Bank cites weak competition and a shortage of highly skilled workers as barriers to investment and growth. The government admitted that the demand for electricity is likely to increase significantly as a result of the AI expansion. Around 37 percent of Armenia's electricity came from natural gas imports from Russia and partly Iran, and 30 percent comes from the Mezamor nuclear power plant. It dates back to the Soviet era, is the only one in the Caucasus and the Russian state-owned company Rosatom supplies the fuel and maintains the system. Armenia is planning a new modular reactor and is considering offers from the USA, China, France and South Korea. Rosatom offered further cooperation, but Armenia wants to become more independent from Russia and signed a civil nuclear agreement with the USA in February. According to Akhverdyan, a “Russia-friendly environment improves market conditions for Armenia.”

It remains to be seen whether Armenia will find a place in the global chip supply chain and break away from its current dependencies without entering into new ones. This also applies to the question of whether the software boom will last if the Russian specialists who started it move on.