Chiplomacy in the Gulf puts Trump's stamp on global tech competition
A deal-making tour in the Middle East has seen Trump using technology as diplomatic leverage, and reveals more about his administration’s approach to China.
What’s happening? Today in the United Arab Emirates, US President Donald Trump closed a $1.4 trillion investment deal covering energy, quantum computing, aircraft, biotech and a massive campus for advanced artificial intelligence in Abu Dhabi.
The campus deal, which will see the UAE cloud and AI giant G42 build a “5 gigawatt” computer farm in partnership with US tech companies, comes “with strong security guarantees to prevent diversion of U.S. technology” according to Commerce Secretary Howard Lutnik.
Earlier in the week, In Saudi Arabia, Trump announced a package of some $600 billion — or $282 billion depending on how you look at it — of investments from the Kingdom.
The White House has said that these are "just a few of the many transformative deals secured in Saudi Arabia."
So what? Both The UAE and Saudi Arabia got access to advanced US tech in return for committing to buy American goods, adopt American technology, and build infrastructure on American soil.
In doing so, the risk that Chinese firms get access to some of the technology has gone up.
But first, America... The announced deals put an emphasis on “deployment” in the United States. The Saudi deal sets out $142 billion in American-made arms sales; and $80 billion of investments in data centers and other “transformative technology”.
It also announces funds in energy (a combined $34 billion through “gas turbines and energy solutions” as well as “energy infrastructure”), aerospace ($5 billion), and sports ($4 billion).
Why new chiplomacy? The Trump administration withdrew the Biden-era AI Diffusion Rule on the eve of the president’s Persian Gulf tour.
The rule — which aimed to control access to advanced chips — relegated both Saudi Arabia and the UAE to a second tier of countries facing tough restrictions.
Some prominent companies, and some of Trump's own advisors objected to the rule; arguing it was overly bureaucratic and would hinder American companies in overseas markets.
With the Biden-era strictures now gone, the Trump administration reportedly wants to strike more country-specific deals for access to cutting-edge compute.
Saudi Arabia and the UAE look like early test cases for this new form of chiplomacy.
First steps: As part of the packages announced this week, California-based Nvidia will ship 18,000 of its best AI chips to Saudi Arabia up front.
AMD said it would also supply technology to build AI datacenters in the Kingdom, in cooperation with a newly launched Saudi AI startup called Humain.
There’s likely more to come. Ahead of the UAE visit, Bloomberg Government reported that a further deal to move 500,000 cutting-edge chips each year to the UAE between now and 2027 could be in the offing.
In all, American companies and their Gulf partners could end up building out data centers in the region with millions of advanced GPUs.
Remember? The original AI diffusion rule was meant to address the concern that China might be able to gain access to diverted shipments of chips from third countries, or access them by renting space on foreign cloud servers.
More specifically, some Biden administration officials harbored concerns about G42’s ties to China; we covered them in Inferences.
Shutting the backdoor. The US eventually approved a deal in which Microsoft invested in G42, while G42 agreed to adopt security controls and sever its ties with Beijing.
The diffusion rule put in place a global licensing requirement on exports of advanced chips, which meant that Saudi Arabia and the UAE could get advanced chips, but only in limited quantities, through companies that agreed to abide by tough security controls.
Could chiplomacy in the Gulf hand China an advantage? Some experts looking at the investments and partnerships announced this week see a massive backdoor being opened to China.
Removing brakes on the flow of advanced semiconductors is a major reversal of the export-controls-led approach taken under the Biden administration.
The Gulf cooperates closely with China, and by opening up the flow of large numbers of advanced chips to the region, the US is increasing the probability that previously-controlled components will leak out or otherwise be accessed by Chinese companies.
On the other hand? The White House is still aiming to exclude Huawei chips from being used by American and other foreign companies.
Even as it rescinded the diffusion rule, the Commerce Department issued guidance stating that using Huawei’s Ascend processors “anywhere in the world” is a violation of US export controls.
Meanwhile, the deal with the UAE suggests that, at least for now, chips will only go to either G42, which has its own strict conditions on avoiding China ties, or to US companies operating in the region, which are subject to Know-Your-Customer requirements aimed at restricting Chinese companies’ access to powerful AI models.
Looked at this way, the Trump administration is putting more pressure on foreign businesses to both comply and collaborate on US terms.
The upshot? The deals made by Trump in the Gulf dwarf Biden-era commitments to a region that has rapidly emerged as a key battleground in the US-China technology competition.
The Middle East has huge wealth, and natural resources, as well as access to energy, and space to build massive data centers. The Gulf states are also important investors in Silicon Valley’s technology ecosystem, through investments in American venture capital funds.
Though Trump’s approach may leave some national security hawks in Washington scratching their heads, it is delivering the big-ticket investments and deals.
Securing investment from the UAE and Saudi Arabia in return for access to advanced chips is a big, splashy win for Trump that will tie America to the region much more closely.
The move also shifts more emphasis towards the execution of export controls and other security measures. Whether this shuts the door more firmly on China’s interests in the region remains to be seen.
Listen in: Minerva and Sinolytics will host a webinar on US-China AI competition on May 20th. You can register here.
What we’re reading:
A deep and detailed new report by Sinolytics on Chinese efforts in the race towards AGI.
Followed up with China’s State Council’s latest national security white paper.
POLITICO on two sides of the story about fentanyl as a factor shaping trade and security negotiations between the US and China.
What we’re looking ahead to:
14 - 16 May: B7 Summit, Ottawa.
4 June: AI+ Expo and Ash Carter Exchange in Washington, DC — let us know if you’ll be in town!
June (expected): The UN Internet Governance Forum.
15 - 17 June: G7 Leaders’ Summit in Kananaskis, Alberta.
24 - 25 June: North Atlantic Treaty Organization (NATO) Summit.
6 - 7 July 2025: Annual BRICS Summit, Rio de Janeiro, Brazil.
9 - 11 July 2025: AI for Good Global Summit.
9 - 23 Sep 2025: UN General Assembly (UNGA 80), New York.
February 2026: India Global AI Summit (expected).