The Gulf bets big on AI as it seeks the 'new oil'
The UAE, in particular, is leading the charge. And data centres lie at the heart of this effort. Abu Dhabi has announced a massive data centre cluster for OpenAI and other US firms as part of the "Stargate" project.The multibillion dollar deal is being funded by G42, an Emirati state-linked tech firm driving the country's AI ambitions. Nvidia will supply its most advanced chips. Tech giants Cisco and Oracle, along with Japan's SoftBank, are also working with G42 to build the first phase."Just like Emirates helped turn the UAE into a global hub for air travel, now the UAE is at a stage where it can become an AI and data hub," says Hassan Alnaqbi, CEO of Khazna, the UAE's largest data centre operator. Khazna, which is majority owned by G42, is building the infrastructure for Stargate. The company currently operates 29 data centres across the UAE.
The UAE and Saudi Arabia want to host the data centres needed to train powerful AI models. "Compute is the new oil," says Mohammed Soliman, senior fellow at the Middle East Institute in Washington DC.In the context of AI, compute refers to the vast processing power enabled by high-end chips and large-scale data centres - the kind the Gulf is now investing billions to build. In today's AI-driven world, infrastructure is the new fuel - in the same way oil was in the industrial age.Mr Soliman says that just as Gulf-based oil companies powered the global economy in the last century, AI firms in the region now want to offer "compute" to power the global economy of the 21st.
Gulf sovereign funds have poured billions into foreign tech giants in recent years. But now, they are pivoting from being passive investors to more active players.In Saudi Arabia, the Public Investment Fund (PIF) has launched a national AI company - Humain - which plans to build "AI factories" powered by several hundred thousand Nvidia chips over the next five years.In the UAE, state-owned investment firm Mubadala has backed G42 and MGFX - a $100bn (£75bn) AI-focused joint venture with Microsoft - and other homegrown initiatives.
However, attracting highly-skilled AI talent remains a significant challenge. To address this, the UAE is wooing overseas companies and researchers with low taxes, long-term "golden visas", and lighter regulation."Building world-class digital and AI infrastructure will act as a magnet," says Baghdad Gherras, founder of a UAE-based AI start-up and a venture investor.Currently, the region has yet to produce a globally recognised AI company like OpenAI, Mistral, or DeepSeek, and it still lacks a deep bench of world-class research talent.Mr Gherras points to the UAE's small population - just over 10 million - as a limiting factor in building a large-scale research ecosystem.
The emergence of Gulf states as ambitious AI players has brought the US-China tech rivalry to the forefront in the desert.Trump's visit gave Washington a strong lead in the region's AI race - but at a cost. As part of its strategic pivot, the UAE has scaled back some China-backed projects and reduced its reliance on Huawei hardware.The emphasis on AI deals during Trump's visit underscores the growing strategic importance of the technology to US diplomacy.Traditionally, the US-Gulf relationship has centred around oil-for-security. But the dynamic is now shifting toward energy, security - and tech.
At the Middle East Institute, Mr Soliman says the AI deals signed during Trump's visit "are more about China than about the Gulf"."It's basically us trying to bring a promising, rising AI region - which is the Gulf - into the American AI stack, to be on Team America AI," he says.The "AI stack" refers to the full pipeline of AI capability: chips, infrastructure, models, and software - mostly dominated by US companies.Mr Gherras says choosing the US over China was a rational choice."At this stage the Americans are ahead in the AI game. So, it made sense for the UAE to bet on them," he says.
However, according to a Reuters report, the multibillion-dollar Stargate deal is still awaiting security clearance, as US officials remain concerned about potential Chinese personnel or technology being involved in UAE data centres.Nevertheless, the project is expected to go ahead, with US firms rallying behind it. But while the US currently leads in AI, Mr Soliman warns against underestimating China."They're scaling fast. They already have an AI stack. It may not be as powerful as America's, but it's cheaper. And for many countries, good enough is good enough."For now, though, both the US and the Gulf stand to benefit from their cooperation.The US gains allies in its quest to outflank the Chinese in the field of AI and compute - the Gulf nations get a powerful partner in their search for a replacement for oil revenues.
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