The US is winning the MENA AI race but don’t count China out

The US is far ahead in the race to become the Arab world’s preferred partner for its costliest, highest-profile AI projects, but China remains a forceful competitor. And in an industry moving this fast, it’s not crazy to think that China could capture significant market share from the US in the medium-to-long term.

Playing prognosticator: That shift, if it happens, will likely be driven both by Chinese advances in AI technology and by MENA nations’ anxiety about being overreliant on the US — or any single nation — when it comes to a technology that appears on track to become more important to their economic and national security than any previous tool, analysts say.

Facing an AI future: “We’re going to live in a world where AI is going to be doing everything from taxes to social welfare benefits to census data to medical care. That infrastructural layer of our society is going to be foundationally important,” Nick Shafer (LinkedIn), an emerging markets strategist focused on MENA and technology and an adjunct professor at the University of California-Berkeley, tells EnterpriseAM. “In a world where there’s no policy stability over what AI regulations will look like a year from now, that means that every country has to hedge their bets.”

There’s no question the US is leading in much of MENA+ now — by a lot:

• Microsoft, Amazon, and Oracle alone have pledged roughly USD 40 bn to Gulf AI projects over the next decade, and US firms including OpenAI and Nvidia are key partners on major data center projects with the UAE AI champion G42 and Saudi champion Humain.
• The US Commerce Department cut a deal that allows Saudi Arabia to purchase up to 35K top-of-the-line AI computer chips from Nvidia and a far more generous deal that allows G42 and its cloud division Core42 license-free access to those chips until at least April 2027. Under the terms of the pact, G42 is at least considering becoming a US company.
• Publicized Chinese AI commitments by Huawei, Tencent and Alibaba, by contrast, total just about USD 1 bn (though this likely undercounts their actual activities in the region).

But that doesn’t tell the whole China story. The country has deep technology ties to MENA that predate the AI revolution, including Huawei’s position as a key 5G supplier across the region; the company’s in-country cloud regions in Egypt, the UAE, and Saudi; the sale of AI services to major network operators across MENA; and significant ties on clean energy and electric vehicles, particularly in the UAE and Egypt. Notably, many of those are areas of tech where the US isn’t super-competitive globally — and all of which could be a basis for future AI cooperation.

PLUS: China’s open-weight AI models are proving popular with MENA companies that don’t want to rely on Western, cloud-based alternatives — either because data sovereignty requirements mean they have to steer clear of the cloud or because they’re wary of being too dependent on the US. This is especially true of businesses outside the big regional AI powers in the Gulf.

AND: Chinese tech (and non-tech) companies of all sizes are investing aggressively across MENA+, particularly in Egypt, Saudi, and the UAE. Chinese smartphone makers have a 35-40% market share at any time, per our analysis of data from Statcounter and Omdia, with Honor, Xiaomi, and Vivo being the big players. Major Chinese brands and South Korea’s Samsung have made Egypt a center of smartphone assembly, pumping out more than 20 mn units a year for sale across Africa and the Middle East.

The US has given Arab countries good reasons to hedge their bets. Most significantly, the Trump administration temporarily yanked access to Anthropic’s Fable 5 and Mythos 5 models for foreign customers in June over security concerns, raising the specter of MENA companies having to replumb their entire AI setups at the whim of US leadership. “If you’re aligning with a partner and then you see that you might not be getting the full package, you’re like, ‘Okay, let me go see what else is on the market,’” Yanis Ben Amor (LinkedIn), a Columbia University researcher focused on AI and public health and executive director of Columbia’s Center for Sustainable Development, tells EnterpriseAM.

The view from the frontlines: “The issues we saw earlier this year led to a really significant amount of concern across our African and MENA customer base,” Lorcan O Cathain (LinkedIn), co-founder of Lua AI, a platform that helps companies develop AI agents, tells EnterpriseAM. “That was one of the first times where companies really started to think about, ‘What happens if somebody locks me out of my model?’”

Why is the US so dominant in MENA AI? Start with the basic technology. US-designed AI chips and frontier models are several months ahead of Chinese competitors in the raw power of their technology and several years ahead in translating those advances into large-scale production, according to analysts. The major Gulf players simply can’t afford to be that far behind the bleeding edge as they’re banking on AI to transform their economies into technological powerhouses.

Infrastructure lock-in: Plus, once they’ve partnered with US firms on tens of USD bns in AI infrastructure (the UAE’s Stargate AI data center cluster alone is projected to cost more than USD 30 bn and is being built in partnership with OpenAI, Nvidia, and numerous other US firms), switching becomes incredibly expensive — probably prohibitively expensive, at least in the short term.

Harder to pivot: “Once American firms and Gulf partners have built that infrastructure together, it becomes much harder to pivot suddenly toward another technological ecosystem,” Vincent Carchidi (LinkedIn), a defense industry analyst at the US firm Forecast International, tells EnterpriseAM. “That's why infrastructure matters so much. Models can change relatively quickly. Infrastructure can't.”

Plus there’s the broader geopolitical relationship. For the Gulf AI champions and sovereign wealth funds, the US is basically a must-have partner on AI because it’s also the region’s security guarantor and producer of many of its advanced weapons systems. There’s no way to pivot toward China without endangering that relationship and leaving the Gulf even more vulnerable to attacks from Iran.

So they’re keeping their distance from China to some extent. The UAE’s G42 fully divested from Chinese partners under US pressure, a factor in the Trump administration’s July decision to give G42 broad access to buy top-of-the-line Nvidia chips. (The official announcement of the deal cited the UAE’s cooperation during the Iran war and help securing US technology.) Saudi’s Humain has agreed not to let Chinese frontier AI models train using its computing power, as a condition of obtaining US chip export licenses.

But they’re also keeping their options open. Both nations maintain strong relationships with Chinese tech and Saudi Arabia has resisted fully decoupling from China on AI. Humain, in particular, has some China ties, including partnering with the Chinese lab MiniMax to build an Arabic-language frontier model.

Those nations have also clearly grown frustrated with the US as a security partner this year, as they suffered the brunt of drone and missile attacks from Iran during a war started by the US and Israel — and as they suffered the economic fallout from Iran’s stranglehold on the Strait of Hormuz. Saudi Crown Prince Mohammed bin Salman has repeatedly sought President Trump’s help responding to attacks from the Iran-allied Houthis, who have closed off Saudi’s access to the Red Sea’s Bab el-Mandeb Strait, an alternate route to export oil, and struck Riyadh’s main airport. Trump called off planned US strikes on the group at the last minute in September and still hasn’t acted on his October pledge to decide “very quickly” whether to join Saudi strikes.

DIY AI?: The UAE and Saudi Arabia are also pushing to develop their own full stacks of AI infrastructure — not just data centers and computing power, but their own large language models and AI services. Egypt is also developing national LLMs. This will give them comparatively more independence from both the US and China than nations that are totally reliant on the two global leaders for AI access.

To be sure: Even super-developed AI services out of the UAE and Saudi Arabia won’t be able to compete anytime soon with the most cutting-edge AI out of the US and China and those nations will still be dependent on the US for advanced computer chips and the most state-of-the-art frontier models. Huawei has yet to make a sale of cutting-edge chips in MENA, but has been reported to be discussing a landmark deal to sell Egypt chips for inference and training.

The UAE and Saudi are on track to remain more independent from the US and China for their AI than nearly any other country on the globe — and could enjoy the relative economic autonomy that comes with that status. “Every middle power worth their salt is trying to create a G42 or a Humain or a Mistral [the French AI firm] now because they see that reality coming,” Nick Shafer, the market strategist, says. “[The Gulf] is ahead of the pack, but the rest of the world is going to try to do the exact same thing. They’ll just be doing it 20 years behind.”