Al-Monitor Pro

Middle East’s AI ambitions caught between US-China chip war


Al-Monitor Pro members


Samuel Wendel

Senior Market Research Analyst, Al-Monitor


Sep. 11, 2023

Bottom Line:

The Middle East is becoming a key theater of operations in the US-China tech war — with semiconductor chips squarely in the crosshairs. The latest salvo came in August, when news surfaced that the United States had expanded export restrictions on Nvidia’s coveted AI chips to include some Middle East countries alongside China, potentially dealing a blow to the UAE and Saudi Arabia’s AI ambitions. This adds heft to Washington’s warning that it will “protect” its advanced technology as Gulf states grow cooperation with China. Beijing is dealing blows too: in August, China crushed US tech giant Intel’s $5.4 billion acquisition of Israeli chipmaker Tower Semiconductor. Looking ahead, the US-China chip war should continue bleeding into the Middle East, making this a moment of uncertainty and opportunity for regional power players with much to gain and lose as AI booms.

Background Facts:
  • Regional fallout from the US-China chip war comes as the Middle East overall plays a small, but important role in the semiconductor industry, which is largely concentrated in East Asia and the United States. Chip sales reached $574 billion globally in 2022, with US companies accounting for 48%, according to the Semiconductor Industry Association.
  • Crucially, the industry — already foundational to modern economies and future tech — is amassing more strategic importance amid surging demand for powerful chips underpinning the AI boom. That market is dominated by US-based Nvidia, now valued over $1 trillion, with its A100 and H100 chips in short supply amid frenzied efforts to commercialize AI.
  • In the Middle East, Israel serves as an important global hub for semiconductor startups and R&D, although current political turmoil is impacting its tech industry. Still, Nvidia announced in May that it would build an Israeli supercomputer using locally made chips.
  • Gulf states have also targeted semiconductors. The UAE was the early mover; in 2009, Abu Dhabi wealth fund Mubadala bought manufacturing facilities from US-based Advanced Micro Devices and created a new chipmaker, GlobalFoundries.
  • Plans for a GlobalFoundries chip plant in Abu Dhabi never materialized, but the firm did go public in the US in 2021, raising $2.6 billion. GlobalFoundries fabricates semiconductors for Apple and Amazon.
  • Saudi Arabia has also explored chipmaking opportunities. The Wall Street Journal reported in March 2022 that Taiwan-based Foxconn was in discussions to establish a $9 billion facility in Saudi Arabia to make chips, EV components and other electronics. Foxconn also reportedly engaged with the UAE on such a project too.
  • Although that mega deal hasn’t materialized, Saudi Arabia partnered with Foxconn in late 2022 to develop Ceer, a homegrown electric vehicle brand. That’s notable, with EVs boosting demand for chips.
  • This activity has come alongside concerted pushes to become AI leaders. The UAE established an AI government ministry in 2017 and launched G42, a state-backed AI company. Last year, G42 launched a $10 billion investment fund and recently bought a $100 million stake in TikTok's owner Bytedance. 
  • Notably, G42 has forged a partnership with Cerebras, a Silicon Valley-based AI chip startup trying to challenge Nvidia. In July, Cerebras announced that it would build and run a global network of AI supercomputers for G42.
  • The network’s first supercomputer became operational in June in the United States. The deal could end up worth over $100 million, reports the Financial Times, among the biggest contracts for a potential Nvidia rival so far.
  • In March 2023, Abu Dhabi’s Technology Innovation Institute launched Falcon, a rival to the viral ChatGPT chatbot, reportedly developed using hundreds of Nvidia A100 chips. In June, the CEO of OpenAI — the company behind ChatGPT — visited the UAE and praised Abu Dhabi’s approach to AI (comments echoing the crypto industry’s embrace of the UAE).
  • In June 2023, Saudi Arabia’s King Abdulaziz City for Science and Technology (KACST) signed a MoU with two Chinese firms to establish a center for designing and manufacturing microchips aimed at energy digitization, smart grids and smart cities.
  • The Gulf’s AI ambitions remain heavily reliant on importing global tech. In August, the Financial Times reported that Saudi and Emirati state-owned groups have been racing to buy thousands of Nvidia chips
  • For instance, Saudi Arabia’s King Abdullah University of Science and Technology (KAUST) has reportedly bought at least 3,000 H100 chips, which cost $40,000 each.
  • Yet, the UAE and Saudi Arabia may struggle to procure more A100 and H100s going forward, with Washington wary of Gulf states growing closer to Beijing. Front and center: Huawei’s ongoing Gulf dealmaking, with the Chinese tech giant just opening a new cloud data center in Riyadh in September. 
  • Although China remains a key market for US chipmakers, semiconductors are in Washington’s crosshairs as it seeks to prevent China’s access to cutting-edge technology, citing national security threats. In October 2022, the Biden administration announced sweeping restrictions on sales of semiconductor technology to China.
  • That includes the United States prohibiting exports of Nvidia’s A100 and H100 chips to China. To comply with these curbs, the company created downgraded versions for the Chinese market, dubbed the A800 and H800. For context: if a US firm needs 1,000 H100s to train a large language model, a Chinese firm could need over 3,000 H800s, according to the Wall Street Journal. 
  • News surfaced in late August that the United States had placed Nvidia’s A100 and H100 chips on a “no-export” list to some Middle Eastern countries, which weren’t named. Restrictions also reportedly apply to AI chips from Advanced Micro Devices. 
  • However, the US Department of Commerce quickly distanced itself from the reports, saying the White House had not blocked chip sales to the Middle East (without directly addressing license restrictions on certain chip types). 
  • Meanwhile, China is hitting back with its own export-import controls and moves impacting the Middle East, with Intel calling off its $5.4 billion acquisition of Israel’s Tower Semiconductor after China’s antitrust regulators failed to approve the transaction before a deadline set by the companies (which both do significant business in China).
  • There are also signs China is progressing despite US curbs. In August, Huawei revealed a new smartphone with an advanced chip only a few years behind the cutting-edge, according to Bloomberg.
  • Simultaneously, China is preparing to launch a new state-backed investment fund that aims to raise about $40 billion for its semiconductor sector, Reuters reported in September. That comes as Chinese tech is eagerly seeking Gulf investment, while Mubadala just opened a new office in Beijing.
Alternative Scenarios:

Scenario 1: Chip manufacturing ramps up in the Gulf 

Saudi Arabia and the UAE pour billions into establishing local semiconductor facilities producing chips for defense companies, EVs, AI and more as they seek strategic autonomy and technological self-sufficiency.

That said, past attempts to launch plants failed to materialize and success would hinge on JVs with global players. Successfully localizing this geopolitically sensitive sector may prove challenging, especially around advanced chips. 

Scenario 2: The UAE becomes a global AI innovation hub

After successfully courting crypto companies, the UAE embraces the AI industry as other jurisdictions crack down — attracting big industry names and becoming an important market for chip firms. 

Yet this should prove far more difficult than wooing crypto business, thanks to AI’s transformative impact on all industries and fierce competition among tech giants. There’s also the challenge of Western backlash to potential misuse of AI by Gulf autocracies. 

Conclusion - Most Likely Scenario:

Seeking a slice of tech’s hottest commodity, Gulf states pursue new semiconductor sector investments, including around AI chips. That could easily see regional wealth funds target China’s chip industry and produce dealmaking localizing some manufacturing in Saudi Arabia or the UAE, but it won’t reduce reliance on global suppliers — leaving them exposed to the US-China chip war as Washington further weaponizes its advantages. Curbing Middle East chip exports clearly signals the United States is willing to squeeze Gulf allies cozying up to Beijing. Will the UAE and Saudi Arabia heed that warning, or further test the formidable US tech containment policy? We’ll soon find out as the AI boom unfolds. Still, Washington can’t fully stop Chinese chip and AI development — just make the process more complicated, costly and time-consuming. A similar fate may befall the UAE and Saudi Arabia. 

Contributor Background:

Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.

We're glad you're interested in this memo.

Memos are one of several features available only to PRO Expert members. Become a member to read the full memos and get access to all exclusive PRO content.

Already a Member? Sign in


The Middle East's Best Newsletters

Join over 50,000 readers who access our journalists dedicated newsletters, covering the top political, security, business and tech issues across the region each week.
Delivered straight to your inbox.


What's included:
Our Expertise

Free newsletters available:

  • The Takeaway & Week in Review
  • Middle East Minute (AM)
  • Daily Briefing (PM)
  • Business & Tech Briefing
  • Security Briefing
  • Gulf Briefing
  • Israel Briefing
  • Palestine Briefing
  • Turkey Briefing
  • Iraq Briefing

Premium Membership

Join the Middle East's most notable experts for premium memos, trend reports, live video Q&A, and intimate in-person events, each detailing exclusive insights on business and geopolitical trends shaping the region.

$25.00 / month
billed annually

Become Member Start with 1-week free trial
What's included:
Our Expertise

Memos - premium analytical writing: actionable insights on markets and geopolitics.

Live Video Q&A - Hear from our top journalists and regional experts.

Special Events - Intimate in-person events with business & political VIPs.

Trend Reports - Deep dive analysis on market updates.

We also offer team plans. Please send an email to and we'll onboard your team.

Already a Member? Sign in