Trump's Rush to Cut AI Deals in Saudi Arabia and UAE Opens Rift With China Hawks

Yahoo

15-05-2025

(Bloomberg) -- President Donald Trump's flurry of artificial intelligence deals during his tour of the Middle East is opening a rift within his own administration as China hawks grow increasingly concerned the projects are putting US national security and economic interests at risk.
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The Trump team has worked out agreements for parties in Saudi Arabia to acquire tens of thousands of semiconductors from Nvidia Corp. and Advanced Micro Devices Inc., while shipments to the United Arab Emirates could top a million accelerators — mostly for projects involving or owned by US companies. Such chips are used to develop and train models that can mimic human intelligence, and they're the most coveted technology of the AI age.
Some senior administration officials are seeking to slow down the deals over concerns the US hasn't imposed sufficient guardrails to prevent American chips shipped to the Gulf from ultimately benefiting China, which has deep ties in the region, according to people familiar with the matter. While the UAE and Saudi accords include high-level language barring Chinese firms from accessing those chips, these officials argue too many details are still unresolved and the deals shouldn't be announced without legally binding provisions, the people said.
China hawks also have grown alarmed over what they see as a willingness by White House AI Adviser David Sacks, who's helping lead the talks, to entertain proposals from Gulf leaders that they view as clear national security risks. None of those proposals are included in the current bilateral accords in the Middle East.
Beyond those security issues, some senior Trump officials question the wisdom of shipping such large quantities of chips to any location outside the US, given the administration's focus on maintaining American dominance in AI, said the people. As Vice President JD Vance put it at a Paris AI summit in February, 'the Trump administration will ensure that the most powerful AI systems are built in the US with American designed and manufactured chips.'
If the announced and planned Middle East deals all come to fruition, the US would still hold the vast majority of the world's computing power — but Gulf countries would for the first time have significant capabilities powered by best-in-class US hardware.
A representative for the White House didn't provide official comment for this story, which is based on interviews with nearly a dozen people who spoke about internal administration discussions on condition of anonymity. Nvidia and a spokesperson for the UAE declined to comment, while Sacks, AMD and the Saudi Arabian government didn't respond to requests for comment.
Advocates for the deals, including Sacks, argue that if the US doesn't encourage the world to use American chips, countries with AI ambitions will eventually turn to alternatives from Chinese companies — which have made progress in closing the gap with Nvidia, the industry leader.
'We need our friends, like the kingdom of Saudi Arabia and other strategic partners and allies, to want to build on our tech,' Sacks said Tuesday while on stage with Saudi Arabia's minister of communications and information technology. The possibility of that tech winding up in China is 'not an issue with a friend like Saudi Arabia at all,' he said.
Not everyone in the Trump administration agrees. In escalating conversations over the past two days, several senior officials have discussed strategies for slowing the implementation of Gulf AI agreements — and pumping the brakes on projects that have yet to be unveiled, the people said. One concern is a bilateral accord between the US and UAE that could include a massive project by OpenAI, the industry pioneer behind ChatGPT.
Trump arrived in Abu Dhabi on Thursday after stops earlier this week in Saudi Arabia and Qatar. Officials on the ground were still in active negotiations the morning of the president's visit, according to people familiar with the matter, who added that they expect the deals to move forward in the near term.
If that happens, China hawks may press their concerns through the regulatory process in Washington. All AI chip shipments to the Gulf require US government approval through a licensing process involving several federal agencies. Administration officials are also in the middle of drafting global semiconductor export control rules after tossing out a framework introduced by President Joe Biden. That provides another opportunity to include specific China guardrails and other strategic priorities.
Sacks, along with other officials who support the Gulf projects, has made the case that aggressive proliferation with security provisions would be a strategic win for the US — and crucial for maintaining American leadership in AI.
Part of Sacks' argument — echoed by tech leaders including Nvidia Chief Executive Officer Jensen Huang — is that the US lead over China in advanced chipmaking is shrinking. If Washington prevents countries with AI ambitions from building data centers with American technology, the logic goes, the US risks ceding those markets to its main geopolitical rival. Companies may choose to buy chips from the likes of Huawei Technologies Co., the Chinese tech giant at the center of Washington's efforts to curtail Beijing's AI ambitions.
On the other side of the debate, some officials in both the Trump and Biden administrations have argued that America's technological lead is quite large and enables Washington to write the rules of the road for as long as other countries still covet American chips. Policymakers can afford to be aggressive in negotiations, these officials argue, and shouldn't allow countries to access best-in-class American hardware without concessions and ironclad security promises.
Trump officials in this second camp think they may be losing the internal fight over Middle East chip shipments — especially after the UAE and Saudi Arabia offered a combined $2.4 trillion in US investments that helped pave the way for the recent AI deals. In particular, some senior administration officials have grown wary of negotiating positions adopted by Sacks, who has been one of the central players on the ground as government officials and tech executives hammer out the accords.
In one meeting with Emirati officials ahead of Trump's trip, Sacks expressed openness to the UAE housing a production facility from Taiwan Semiconductor Manufacturing Co., the leading maker of chips for the likes of Nvidia and AMD, people familiar with the matter said. The UAE has long coveted such a plant and asked the US government for its support as part of the broader chip accord.
The hawkish Trump officials view a possible TSMC plant in the UAE as dangerous, the people said. Supporting the UAE's ambitions to manufacture AI chips domestically would create unnecessary national security risks given the country's ties to Beijing, the officials argue, especially if political alliances change in the future. The current accord doesn't include a TSMC plant, though separate conversations about such a project remain ongoing. TSMC declined to comment.
Another lingering concern with the UAE is G42, the leading Abu Dhabi-based AI firm with historic ties to Huawei. Although it agreed to divest from Huawei and other Chinese providers to pave the way for a $1.5 billion partnership with Microsoft Corp. last year, some US officials remain wary of G42's commitment to American priorities. Now the Trump administration is considering an agreement that would allow G42 to buy the equivalent of more than a million Nvidia H100 accelerators, among the chipmaker's top offerings, Bloomberg has reported.
Critics of that accord include the chairman of the House China Select Committee, which last year released a video detailing the bipartisan panel's G42 concerns. The voiceover in that video comes from Landon Heid, Trump's nominee for a top position at the agency that writes chip export rules and decides whether to approve individual semiconductor sales.
Details of the security requirements in the broader UAE accord will be sorted out in a working group composed of American and Emirati officials, according to the people familiar with the matter. Topics already in the agreement include provisions to prevent diversion of chips to China and bar Chinese AI companies from remotely accessing UAE facilities. Sacks has been angling to steer efforts to write the fine print, the people said — something that several of his US counterparts oppose.
At one point in negotiations with Saudi Arabia, Saudi officials suggested they may install US chips in facilities that contain Huawei hardware, the people said, adding that the hardware in question was not Huawei's AI chips. The US delegation shot down that suggestion in the meeting, but after the fact, Sacks suggested that Trump's team should at least evaluate the idea. While some officials understood Sacks' reaction as a suggestion to consider national security concerns on a technical basis, others saw it as an immediate disregard for why US officials would hold those concerns in the first place.
For officials who view Huawei as a red line in Washington's China policy, the exploration of that possibility was unacceptable. The idea is not part of the current accord, people familiar with the matter said.
'The policy objective of preventing diversion to countries of concern is an absolutely important objective of the United States but it is not a difficult one to achieve,' Sacks said during his Middle East appearance. 'The truth of the matter is that all one would have to do is send someone to a data center and count the server racks to make sure the chips are still there.'
--With assistance from Riley Griffin and Nick Wadhams.
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