The Rise of AI Diplomacy

In a grand conference room beneath shimmering chandeliers and vibrant lights, dozens of dancers waved fluorescent bars in a precisely choreographed performance. A backdrop displayed cascading green Matrix code alongside skyscrapers rising from a desert landscape. A narrator proclaimed the emergence of "a sublime and transcendent entity": artificial intelligence. To emphasize AI’s transformative power, a digital avatar—Artificial Superintelligence One—sang John Lennon’s “Imagine” alongside a young boy, prompting enthusiastic applause from the audience. This marked the beginning of the final day of what one government minister called the “world’s largest AI thought leadership event.”

This striking scene occurred not in Silicon Valley, but in Riyadh, Saudi Arabia, during the third edition of the city’s Global AI Summit in September. Inside a vast exhibition center adjacent to the Ritz Carlton—where Crown Prince Mohammed bin Salman previously detained hundreds of wealthy Saudis on corruption charges—robots served tea and mixed drinks. Officials in long white robes celebrated Saudi Arabia’s advancements in AI, while American and Chinese tech companies showcased their products and signed memorandums of understanding with the government. Attendees distributed stickers declaring, “Data is the new oil.”

AI is becoming increasingly central to Saudi Arabia and the United Arab Emirates (UAE) as they seek to transform their oil wealth into new economic models in anticipation of a world moving away from fossil fuels. For American AI companies eager for capital and energy, these Gulf states and their sovereign wealth funds represent promising partners. Some U.S. policymakers see this as a once-in-a-generation opportunity to leverage American computing power to draw the Gulf states away from China and strengthen an anti-Iran coalition in the region.

However, expectations should be moderated. Saudi Arabia and the UAE’s ties to China are stronger than ever and unlikely to shift. While the Gulf states are keen for advanced AI chips that only the U.S. can currently provide, they also have strong incentives to diversify their partnerships, leveraging relationships with both superpowers to secure favorable terms. The U.S. and its tech companies should pursue cooperation with the Gulf states on AI, but with caution and safeguards in place, avoiding the misconception that this will lead to a lasting strategic realignment in the region.

Bridging the Gulf

The Gulf states’ interest in AI is not new, but it has surged recently. Saudi Arabia is establishing a $40 billion fund for AI investments and has created startup accelerators inspired by Silicon Valley to attract tech talent. The UAE launched the world’s first university dedicated to AI in 2019, and since 2021, the number of AI professionals in the country has quadrupled. The UAE has also released open-source large language models claimed to rival those of Google and Meta, and it launched an investment firm focused on AI and semiconductors with potential assets exceeding $100 billion.

U.S. technology firms have responded enthusiastically to this interest. Training the latest AI models requires vast amounts of energy, capital, and land—all abundant in the Gulf. OpenAI’s CEO, Sam Altman, has discussed multitrillion-dollar investments in chips and data centers with Emirati investors, while state-backed Emirati firms participated in OpenAI’s recent fundraising round. Executives from semiconductor giants like Taiwan Semiconductor Manufacturing Company and Samsung have considered building factories in the UAE. Amazon announced a $5.3 billion investment for data centers in Saudi Arabia, and the AI startup Groq partnered with Saudi Aramco to create a significant AI data center. Microsoft has invested $1.5 billion in G42, the UAE’s leading tech firm, facilitating Microsoft’s expansion into emerging markets while providing G42 with access to its computing capabilities.

While American AI companies see a commercial opportunity, some U.S. policymakers view a strategic one: leveraging access to American computing power could help draw countries away from China’s expanding technological ecosystem. The U.S. aims to strengthen ties with the world’s largest oil exporters and deepen an anti-Iran coalition. Both Saudi Arabia and the UAE are increasingly influential; for instance, in 2023, the UAE announced $45 billion in investments in Africa, surpassing Chinese investments in the region that year. Washington prefers that Gulf investments target U.S. tech firms rather than Chinese ones.

The U.S. holds significant leverage in these tech partnerships, as exporting advanced chips for AI data centers requires licenses from the government. These approvals have been slow, prompting concerns that without timely action, China may present an alternative. At the AI summit in Riyadh, discussions about U.S. export controls were common. While Google and Microsoft had prominent booths, Chinese firms like Alibaba and Huawei were not far behind, a reminder of the options available to Gulf states if Washington adopts a more restrictive stance.

Hedging Their Bets

Despite the economic and geopolitical opportunities for the U.S. in the Gulf, there are risks associated with offshoring advanced AI chip production to authoritarian regimes with sophisticated surveillance systems and military ambitions, particularly in light of their ties to China. Lawmakers and Pentagon officials worry that Chinese firms linked to the People’s Liberation Army could access American chips through Middle Eastern data centers, undermining U.S. efforts to restrict China’s access to cutting-edge AI technology.

Moreover, if AI systems gain the capacity to drive substantial economic growth or develop advanced military applications, the global balance of power could be disrupted. Therefore, the infrastructure that supports frontier AI systems—especially the extensive data centers for training and hosting these models—should not be offshored lightly. As former OpenAI researcher Leopold Aschenbrenner noted, “Do we really want the infrastructure for the [next] Manhattan Project to be controlled by some capricious Middle Eastern dictatorship?”

The UAE has made significant efforts to address these concerns, presenting itself as a responsible steward of American AI technology. Reports indicate that the UAE has committed to securing its data centers by removing Chinese hardware that could pose security risks, screening clients and employees, and monitoring chip usage. Under U.S. pressure, G42, chaired by Emirati national security adviser Sheikh Tahnoon bin Zayed, divested from Chinese firms and eliminated Huawei technology from its partnership with Microsoft. Recently, the U.S. Department of Commerce issued a rule that may ease the shipment of AI chips to the Middle East in response to these efforts.

The UAE has expressed its desire for a "marriage" with the United States centered on AI. However, U.S. policymakers should recognize that such a partnership is unlikely to be exclusive. Both Saudi Arabia and the UAE have strong incentives to diversify their alliances, especially in light of American domestic political volatility and the ongoing, though often frustrated, U.S. attempts to "pivot" to Asia. China is the largest oil buyer for Saudi Arabia and the UAE's top non-oil trading partner, and it refrains from criticizing either nation for its human rights records or regional actions. Chinese drones are crucial to the UAE's covert operations in Sudan, and earlier this year, the Chinese and Emirati air forces conducted joint exercises in Xinjiang. Despite G42 divesting from Chinese firms, a new investment vehicle in Abu Dhabi has taken over the management of G42’s China-focused fund, also overseen by the Emirati national security adviser. At a recent conference in Abu Dhabi, officials from both countries referred to the last few years as a "golden era" of Chinese-Emirati cooperation.

Navigate Carefully

Given this context, the United States should avoid imposing a blanket ban on all advanced AI chip sales to the Gulf. Many emerging powers believe they can successfully balance relationships with both the U.S. and China, and U.S. policymakers should generally refrain from pressuring regional partners into zero-sum choices. At times, the U.S. will need to operate in regions and sectors where American and Chinese interests intersect. It wouldn’t serve U.S. interests if Washington were to drive Gulf investments toward projects that enhance China’s technological capabilities.

U.S. policymakers should continue their negotiations with Gulf states regarding chip exports, but they must do so with a clear understanding of the regimes involved, the associated risks, and the limited potential for such collaboration to reshape the political landscape of the Middle East. The Gulf states are unlikely to sever ties with China, except in specific instances, and even then, those decisions will remain subject to renegotiation. Without significant investments in both physical and cybersecurity measures, establishing large data centers in non-allied nations increases the risks of intellectual property theft and misuse, particularly if these centers host sensitive AI model parameters. The U.S. will need to allocate resources to monitor and enforce compliance for any agreements reached. In the absence of independent verification, American assurances regarding their management of U.S. technology should be viewed with skepticism. Additionally, U.S. policymakers should encourage tech companies to establish their most advanced facilities within the United States.

As this new era of AI diplomacy unfolds, Washington will encounter similar challenges repeatedly: controlling the spread of technologies with significant national security implications without stifling American companies or driving potential partners toward China. In negotiations with the Gulf, U.S. policymakers must ensure they set the right precedents.