The UAE and Saudi Arabia are making significant strides in expanding their technology sectors through substantial investments in semiconductor and AI capabilities, as highlighted by technology experts. These two GCC countries, which are the Arab world's leading economies, have outlined ambitious investment plans for AI and semiconductor installations and production.

"While spending on AI-led facilities by Microsoft Corp, among others, has been delayed due to US export regulations, traditional datacentres operated by Alibaba Group Holding Ltd and Amazon.com Inc are already in operation," analysts from S&P Global Market Intelligence noted. They observed that the slow build-out is evident in the imports of servers, computers, and storage systems, which amounted to just $3.2 billion in the 12 months leading up to June 30, representing a 7.0 per cent year-over-year decline.

"Should US supplies become unavailable, firms from mainland China and Hong Kong, which already account for 31.8 per cent of traditional server supplies, may take the lead," S&P Global Market Intelligence added in their report. This report was released following a meeting between leaders of the UAE and the US, where discussions focused on key areas such as artificial intelligence, renewable energy, climate, and space.

"Few countries are advancing as rapidly in advanced technologies and artificial intelligence—and as closely aligned with the US—as the UAE," stated Yousef Al Otaiba, the UAE Ambassador to Washington, on X. In February, OpenAI CEO Sam Altman suggested that the UAE could serve as the world's "regulatory sandbox" for testing artificial intelligence. This was followed by Microsoft's $1.5 billion investment in G42, the UAE's leading artificial intelligence firm, in April.

BlackRock, Global Infrastructure Partners, Microsoft, and the Mubadala-backed MGX investment company recently announced the Global AI Infrastructure Investment Partnership, reinforcing the UAE's strategic focus on US technology and AI to drive future economic growth. The S&P report also highlighted that AI datacentre builders face competition for chip supplies from global hyperscalers (including Microsoft), whose capital expenditures are projected to increase from $104.2 billion in 2023 to $173.3 billion in 2025.

Both the UAE and Saudi Arabia aspire to become major chip manufacturing hubs. Saudi Arabia has already established a strategy with Foxconn Technology Group, while the UAE's sovereign fund co-invested in GlobalFoundries Inc. However, both countries are competing with the US, the EU, Japan, and others to attract new investments, according to the report.

The S&P report further noted that access to manufacturing machinery is another challenge, with mainland China accounting for 47 per cent of global imports as its chip firms expand mature technologies. Delays in new projects in Europe may offer a source of supplies. "In the interim, state-owned funds need to collaborate with private sector chip producers that are experiencing a long-awaited, albeit potentially short-lived, cyclical upturn in demand for non-AI systems," the report concluded.