Guest Article by Mostafa Bushehri

Caught between Silicon Valley and Shenzhen, the Gulf is betting its oil fortune on becoming the world’s next AI super-node.

“We are in the age of a huge industrial revolution that will change the rules of politics, economics, and societies,” declared Arab League Secretary-General Ahmad Abul Gheit at the FIKR 16 Conference in 2018. He urged Arab youth to harness the potential of the Fourth Industrial Revolution for a brighter future. Nearly a decade later, that vision is colliding with a stark geopolitical reality: the emergence of a bipolar tech world dominated by the United States and China. For the Gulf states – caught between ambition and alignment – this new era of AI is no longer just about innovation. It’s about survival in a world where digital infrastructure, data, and algorithms are increasingly instruments of global power.

Saudi Arabia has emerged as one of the most ambitious players in the Persian Gulf’s AI race. Spearheaded by the Saudi Data and Artificial Intelligence Authority (SDAIA), the Kingdom is pursuing a bold strategy to position itself as a global hub for generative AI. This drive is central to Vision 2030, Crown Prince Mohammed bin Salman’s flagship initiative, to diversify the economy beyond oil and establish Saudi Arabia as a leader in emerging technologies. Backed by the powerful Public Investment Fund, the Kingdom has launched initiatives like the National Semiconductor Hub and forged strategic partnerships with global firms such as Google. In September 2024, Saudi Arabia partnered with U.S.-based semiconductor startup Groq — a rising competitor to Nvidia — to construct what is expected to become the world’s largest data center specialized in AI processing, slated to be operational by the end of the year. Most strikingly, in October 2024, the Public Investment Fund and Google Cloud announced a joint venture to establish a new global AI hub within the Kingdom. Annual gatherings like LEAP in Riyadh showcase both intent and capital, attracting billions in investment. Most recently, the state announced the creation of AI company Humain, tasked with building advanced AI infrastructure, including data centers and Arabic-language large language models (LLMs).

The United Arab Emirates has been equally assertive in its pursuit of AI leadership. “We want to become the world’s most prepared country for Artificial Intelligence,” declared Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s Vice President and Prime Minister. That ambition is codified in the UAE National Strategy for Artificial Intelligence 2031, which outlines a roadmap to integrate AI across government, education, and business, projecting up to $90 billion in additional economic growth. Abu Dhabi, in particular, has invested aggressively, not only in infrastructure and talent but also through national tech champions. G42, one of the Emirates’ flagship AI firms, has formed high-profile partnerships with Microsoft and chipmaker Cerebras. At the same time, the UAE government’s investment arm MGX will be a general partner within the $30 billion fund for AI infrastructure launched by BlackRock and Microsoft. The UAE is even exploring AI’s role in legislative processes and education. With these moves, the country is not just positioning itself as a fast adopter, but as a potential architect of the global AI order, seeking to future-proof its economy while navigating an increasingly fractured technological world.

Qatar, a wealthy gas exporter and close U.S. strategic partner, is also accelerating its push to become a regional AI leader—motivated in part by the growing technological competition from Saudi Arabia and the UAE. Unlike some of its neighbors, Qatar moved early to formalize its AI ambitions. In 2019, it launched a National AI Strategy focused on six core areas: education, data access, employment, business, research, and ethics. This was followed by the formation of a national Artificial Intelligence Committee in 2021 to coordinate policy across government, academia, and finance. With its AI market valued at over $400 million and expected to grow substantially, Qatar is aiming to leverage its energy wealth to transition into a knowledge-based economy. The recently unveiled $2.4 billion incentive package signals serious intent, bolstering its digital infrastructure and innovation ecosystem. Its Digital Agenda 2030 and the Third National Development Strategy place AI at the center of national transformation goals – particularly in healthcare, government services, and finance. Most recently, Doha signed a five-year agreement with U.S.-based Scale AI to deploy AI tools and training programs, deepening its integration into the global AI supply chain and enhancing state capacity through AI-driven public services. Scale AI, which provides large volumes of high-quality labeled data for training AI models, counts among its clients Microsoft, Morgan Stanley, OpenAI, and Cohere, linking Qatar’s AI ecosystem more directly to some of the world’s leading technology firms in the West.

While the Gulf states remain deeply integrated into Western tech ecosystems, they have increasingly diversified their partnerships—not as a challenge to the West, but as a pragmatic response to their national development agendas. Rather than choosing between Silicon Valley and Shenzhen, Gulf countries have sought to build a complementary architecture—leveraging U.S. cloud capabilities and AI software, while using Chinese firms to accelerate domestic infrastructure buildouts.

China’s Involvement

China’s longstanding presence in the region, traditionally rooted in energy security — nearly half of its oil imports come from five MENA countries — has evolved significantly since the launch of the Belt and Road Initiative (BRI) in 2013. Today, 19 Arab countries participate in BRI-related projects, and China is the largest trading partner and investor for several. Under the tech-focused Digital Silk Road, Beijing has extended its footprint into telecommunications, AI, and cloud infrastructure—not as a replacement for the West, but as a complementary player in a rapidly expanding digital ecosystem.

Firms like Huawei have secured major 5G contracts across the Gulf, while SenseTime, a Chinese AI firm, partnered with Saudi Arabia’s national AI company (SCAI) in 2022 through a $200 million deal to build local capabilities. For Gulf countries, such partnerships are less about geopolitical signaling and more about accelerating domestic infrastructure through cost-effective, turnkey technologies. China’s offerings—free from many of the political conditions often attached to Western funding—are particularly attractive in sectors where rapid implementation is a strategic priority.

By cultivating ties with both Washington and Beijing, Gulf states – particularly Saudi Arabia, the UAE, and Qatar – are not attempting to sit on the fence, but to blend strengths from two different ecosystems. From the U.S., they seek access to cloud services, chips, and foundational AI models. From China, they secure scalable infrastructure, hardware, and supportive financing for sovereign development. This strategy reflects not ambivalence, but ambition: to become architects of AI power rather than mere consumers.

AI Diffusion Policy

Yet, as the U.S.-China tech rivalry hardens, the space for this balancing act is narrowing. Washington increasingly treats AI as a national security concern. In January 2025, the Biden administration introduced the AI Diffusion Policy and Export Controls, a sweeping new regime limiting the export of AI chips, cloud access, and model weights. The policy distinguishes between trusted allies and adversaries but places Gulf states in a complex middle ground—not restricted, but increasingly scrutinized, especially in deals involving Chinese partners.

The policy introduces a tiered framework. A small group of trusted allies (18 members) – including countries like Japan, the U.K., Germany, and South Korea – are largely exempt from restrictions. At the other extreme, countries under U.S. arms embargoes, such as China and Russia, are fully excluded. In between lies a murky middle – countries not fully aligned with either camp but deeply invested in AI. This includes Israel, the UAE, and Saudi Arabia. While not blacklisted, these countries now face new scrutiny and constraints, especially when partnering with Chinese firms or pursuing sensitive infrastructure projects. The message from Washington suggests growing discomfort with dual-alignment strategies—raising questions about how long Gulf states can maintain technological neutrality.

Aware of the tightening regulatory environment, Gulf states are now turning to diplomacy and personal influence to secure continued access to advanced technologies. Their strategy hinges on strong ties with the Trump administration. In early 2025, Sheikh Tahnoon bin Zayed Al Nahyan – the UAE’s national security adviser and brother of the country’s president – visited the United States to press for assurances on AI cooperation and access. His itinerary reflected the high stakes: meetings with President Trump, his national security adviser, the secretaries of commerce and the treasury, as well as tech titans and influential figures in both Washington and Silicon Valley, including Elon Musk (Head of DOGE), David Sacks (the president’s special adviser on AI and crypto), and the Executive Leaders of Microsoft, Palantir, Amazon, Oracle, and Andreessen Horowitz Venture Capital.

At the same time, both the UAE and Saudi Arabia, along with Qatar, have pledged to invest hundreds of billions of dollars into the U.S. economy — moves designed not only to deepen commercial ties but also to soften political resistance to their AI ambitions. It is no coincidence that, echoing his first term, President Trump’s first overseas trip after returning to office is the Middle East, including stops in Saudi Arabia, the UAE, and Qatar. On the surface, traditional topics like Iran, energy, and the prospect of Arab-Israeli normalization may dominate headlines. But beneath those familiar flashpoints, the true substance of the visit is increasingly centered on AI and the economy. For Gulf leaders, this is not just about diplomacy – it’s about securing a stake in the future of global power.

The Fourth Industrial Revolution – what many now call the AI economy or AI-ization – is not just about large language models like ChatGPT. It is a sweeping transformation touching every domain: biotechnology, healthcare, infrastructure, warfare, and geopolitics. In this new order, the Gulf holds two corners of the AI triangle: vast sovereign capital and abundant low-cost energy.

Global power demand from data centers is projected to rise by 50% by 2027 and up to 165% by 2030, according to recent estimates. While Gulf states currently have relatively modest AI infrastructure—each with around 0.4 gigawatts of capacity—they are scaling rapidly. Low electricity costs, 30% to 50% below U.S. averages, give them a crucial advantage. The UAE’s National Digital Economy Strategy, for example, aims to nearly double the digital sector’s share of non-oil GDP within a decade. Saudi Arabia, the UAE, and Qatar are channeling massive investments into power generation – across fossil fuels, natural gas, and renewables – to meet the surging electricity demands of AI. The equation is simple: computing power needs energy, and the Gulf has it. Cheap electricity, deep capital pools, and industrial ambition are converging to place the region at the heart of the AI-powered global economy. Rather than being sidelined in the post-oil era, the Gulf is positioning itself as one of its architects.

What the GCC lacks is the third corner: cutting-edge technological know-how, still dominated by the United States, with China fast catching up. To bridge that gap, Gulf states have tried to hedge – partnering with both superpowers, blending infrastructure deals with Silicon Valley access. But as the U.S.-China tech rivalry hardens into a matter of national security, the space for balancing shrinks. The Gulf’s AI honeymoon may soon be over. Sooner or later, choices will have to be made.

Image credits: USDA

Mostafa Bushehri
Mostafa Bushehri is a macro strategy researcher specializing in finance and geopolitics. He previously served as a Global Energy Fellow at Columbia University’s Center on Global Energy Policy and holds a Master’s in International Finance from Columbia University.