At the start of the summer, the United Arab Emirates’ dream of serving as the world’s AI hub was in trouble. Iranian drones and missiles were making data center construction difficult and dangerous. Bureaucratic fights within the Trump administration had stalled progress on long-promised chip exports. Emirati leaders were expressing growing frustrations with the United States.
But earlier this month, the administration threw them a lifeline. In a rule published on July 14, the U.S. Department of Commerce lifted restrictions on the export of advanced AI computer chips and a range of other civilian and military technology to the UAE. The change, which vaults the UAE into the same favored category as longstanding NATO allies, offers the Emirati government and its state-run AI company G42 near-unfettered access to the most advanced U.S. AI technology.
Trump administration officials likely view the move as a way to get U.S.-UAE AI investments back on track, while also rewarding a close and vocal supporter in the Iran war. It may also have helped that Trump’s family has financial ties to G42’s royal owner through the cryptocurrency firm of Eric Trump, Donald Trump, Jr, and the son of Trump’s Middle East envoy, Steve Witkoff. But it’s unclear what larger U.S. security interests are served by the change. On the contrary, such a significant loosening of AI export controls may make it easier for China to access U.S. chips through data centers in the Middle East as a means of skirting U.S. export controls. The move will increase the UAE’s influence over the future of U.S. AI policy. And it will encourage building critical digital infrastructure on a geopolitical fault line, within easy range of drone and missile strikes.
Yet as dramatic as the new rule is, it will not solve every problem facing Gulf AI buildouts. On the U.S. side, opaque deals and bureaucratic infighting have repeatedly delayed AI exports while associating sales with Trump’s perceived corruption. Much of the bureaucracy has now been cleared, but the political scrutiny will remain—and likely intensify if Congress changes hands in November. On the Gulf side, it is not clear whether the economics of sophisticated AI data centers will work while the war continues. Nor is a rule that favors the UAE over Saudi Arabia and Israel likely to prove sustainable. The Trump administration has, on paper, given the UAE everything it has asked for. Whether abandoning U.S. oversight of technology transfers will, in fact, create a new AI superpower in the Gulf remains to be seen.
Diffusion Delays Hinder Gulf Buildouts
The Gulf’s AI ambitions peaked in mid-2025, when President Trump visited the region and U.S. tech giants announced a wave of deals with Saudi, Emirati, and Qatari partners. Gulf states hoped that these arrangements would position them as the “third epicenter” of AI technology, after the United States and China, as one Saudi-based executive put it. Gulf commitments to the U.S. AI stack in particular prompted speculation that these investments were designed to secure Washington’s support for their security even in a post-oil future.
Central to these plans were Gulf officials’ expectations that the Trump administration would facilitate access to the highest-end AI chips from companies like Nvidia—the kind that could permit Gulf firms like G42 or Saudi Arabia’s Humain to train their own frontier models and become true AI superpowers. To much public fanfare, the Commerce Department rescinded the Biden administration’s AI Diffusion Rule on the eve of Trump’s visit, eliminating a tiered system that restricted chip access for many countries, including the UAE.
Even then, the chips did not flow. Previous Biden-era rules still required government approval for all chip sales to the UAE and Saudi Arabia. License approvals moved slowly. It was not until November of 2025 that the Commerce Department authorized the export of 35,000 Nvidia Blackwell processors to G42 and Saudi Arabia’s Humain—enough to fill a 100 megawatt AI data center in each country. These approvals came after the UAE’s national security adviser purchased a half-billion-dollar stake in a cryptocurrency venture founded by the families of Trump and Witkoff. While substantial, those shipments fell far short of the 100,000 chips per year G42 had sought in earlier discussions or the 600,000 chips over three years touted by Humain in a press release.
Concerns across the U.S. bureaucracy slowed exports. The Commerce Department reportedly authorized sales only after pressing the UAE to make good on investment pledges, and conditioned sales on “rigorous security and reporting requirements.” The State Department hinted at continuing U.S. concerns over transferring sensitive technology to the UAE, perhaps reflecting G42’s reported ties to Huawei. And lawmakers in Congress echoed U.S. intelligence community warnings about the UAE’s broader relationship with China. Only the “first batch” of chips—no number provided—had actually reached G42 before this month’s rule change.
There have also been some signs of slackening demand in the region for high-end AI chips. Saudi Arabia’s AI champion, Humain, received at least some Blackwell chips last December, with some government services reportedly using the new hardware. Yet Humain executives had a rough outing on a prominent Saudi podcast this May, offering ambitious plans but few specifics on their proposed AI buildout (prompting some online mockery).
Perhaps as a result of the region’s difficulties capturing advanced AI, most new deals appear to focus on applying existing technology rather than chasing the frontier: Saudi Aramco and IBM are collaborating on industrial AI applications; G42 has partnered with Spain’s Santander on banking tools; and Gulf capital continues to seek AI returns abroad, with Kuwait’s sovereign wealth fund investing heavily in overseas data infrastructure even as Kuwaiti AI ventures have struggled at home. Even before the war, Saudi officials had begun emphasizing applications over training new models, and the UAE’s Minister of State for AI presented his country’s AI buildout as a measured expansion rather than “blindly” constructing infrastructure in advance of demand.
Wartime Delays
The more existential challenge to the Gulf’s AI ambitions has been the war with Iran. U.S. and Israeli strikes have prompted retaliatory Iranian attacks on the Gulf monarchies, aimed at pressuring the United States towards a ceasefire.
Data centers in Bahrain and the UAE were among the first targets of Iranian drones and missiles, and an Islamic Revolutionary Guard Corps video threatened further attacks on the Stargate UAE data center campus. Last week, after the collapse of the ceasefire, Iranian missiles once again hit Amazon data centers in Bahrain. Rather than AI deals binding the United States to the Gulf’s defense, Abu Dhabi and Riyadh now find themselves contending with the economic and security fallout of a U.S.-led war of choice on Iran.
There’s still a case for U.S.-Gulf AI ties—Gulf states offer cheap energy and are likely to continue prioritizing AI investments—but the attacks on data centers confirmed concerns about the physical and geopolitical risks of placing key AI infrastructure in the region. The war has also threatened the Gulf’s central advantage in the compute buildout: the speed at which it can bring data centers online. Before the war, the Gulf, and especially the UAE, held a clear advantage in its ability to build major capital projects quickly. A model of data center economics published by two of us suggests that it took the UAE an average of around 22 months to connect a 100 MW data center before the war, slightly faster than the two-year U.S. timeline. Satellite imagery suggests the UAE’s marquee Stargate data center campus is moving forward despite the fighting, but the war has almost certainly slowed construction. Snarled supply chains have delayed shipments and raised costs for materials. Air strikes have disrupted Gulf ports. And the conflict is likely to set back efforts to attract the skilled workforce necessary for large, complex engineering projects, while driving up insurance costs and capital expenditures for physical data center protections and redundancy.
Even under relatively conservative assumptions—a six-month delay to construction timelines, a ten percent increase in non-IT construction costs from shipping disruptions, and an annual premium for war insurance of 0.5 percent of capital expenditures—the economic returns to building a data center in the UAE are likely to fall below those to building in the United States. And given that Amazon Web Services servers in Bahrain and the UAE have been offline since early March, hyperscalers may think twice before locating new infrastructure in the Gulf.
The war will also make it harder to attract and retain top talent. Israel, for example, has faced mounting pressure on its high-tech workforce in the aftermath of its wars in Gaza, Lebanon, and Iran. A non-profit representing advanced industries cautioned that many Israel-based employees have sought to relocate in recent years, with only “local human capital” offsetting recruitment challenges. The UAE, with its migration-based labor market, is far more exposed. One AI workforce report estimated that only around 15% of the country’s AI talent was educated in-country, compared with over 50% in Singapore and Saudi Arabia, nearly 70% in the United States, and over 90% in Israel.
AI Concessions, not AI Policy
The Trump administration’s decision thus comes at a critical moment for the Gulf. By moving the UAE from an export control category known as Country Group D:3 and D:4 to Country Group A:5—alongside traditional U.S. allies in Asia and Europe—the administration has lifted restrictions on the UAE’s ability to purchase AI chips and other dual-use technology, including military items and energy infrastructure with military applications. State-backed Emirati companies like G42 can now buy millions of AI chips, build some of the world’s biggest data centers at home and abroad, and host frontier AI models within their territory, without the security conditions the Commerce Department had imposed on earlier shipments.
Whether the UAE AI industry can take full advantage of this upgrade is another question. While the war continues, companies will be slow to invest and build in the region, and G42, for all its ambitions, faces constraints in talent and capacity compared to U.S. hyperscalers. Investments in foreign AI development and data center construction may continue to look more attractive than building the technology at home. Abu Dhabi’s AI investor MGX, for example, recently doubled down on a Paris-based data center anchored by French national champion Mistral, while Aramco has invested in and partnered with French quantum computing firm Pasqal. Both moves suggest an interest in retaining technological options outside the two dominant AI ecosystems.
Whatever the fate of Emirati AI ambitions, the move will have ramifications well beyond the UAE. Israel, Saudi Arabia, and other Gulf states will no doubt seek a similar arrangement; if they succeed, the number of countries with access to some of America’s most sensitive technological exports will dramatically expand. Lifting controls also removes limits on China’s ability to remotely access data centers located in the UAE, since those limits were imposed through export licenses that no longer apply. And protecting model weights—the core intellectual property of an advanced AI model—from cyber theft may become more difficult, since the U.S. government now has less visibility, legal authority, and freedom of maneuver in the Gulf.
It’s not clear what the United States got in return. Emirati officials have reportedly promised that G42 will “become a U.S. company, mostly owned by U.S. investors,” which would give the U.S. government greater oversight of its operations. But the UAE appears to have made no new security commitments to the United States, and offered no visible concessions on its relationship with China or Russia. The administration may simply be seeking to formalize its view that the UAE, with its capital, energy resources, and regional diplomatic and military clout, belongs in a higher echelon of U.S. partners. U.S. officials may hope that bringing the country closer will shore up U.S. influence with a key swing state at a time when other partnerships in the region, most notably with Israel, are under strain. And key figures in President Trump’s orbit have benefited from Emirati connections.
To little public notice, the administration has handed away what may prove one of the United States’ most valuable geopolitical assets in the coming years: control over compute. For an administration increasingly vocal about AI’s geopolitical stakes, and one that emphasizes transactionalism in every other diplomatic engagement, the decision to upgrade the UAE’s status so dramatically while asking for so little in return stands out. The decision may thus be vulnerable if relationships in the region shift or leadership in Washington turns over. For now, however, the UAE has achieved a remarkable victory.
