Welcome to the new face of protectionism: A generation ago, protectionism was all about raising trade barriers to protect domestic industries. Today, it’s taking on a new flavor: Blocking Arab capital from industries that western nations consider strategic.

We’re not being hyperbolic: A US watchdog has reportedly forced Aramco Ventures’ VC fund Prosperity7 to fully divest Rain Neuromorphics, a Silicon Valley AI chip startup, Bloomberg reports, citing unnamed sources it says are familiar with the matter.

What happened? The Committee for Foreign Investment in the United States (CFIUS) has the authority to "review and to take action to address any national security concerns arising from certain non-controlling investments and real estate transactions involving foreign persons," according to the US Treasury website.

CFIUS reportedly told Prosperity7 to unwind the transaction “sometime in the last year,” Reuters notes, leading the VC to flip its entire stake to US-based investment firm Grep VC. The USD 1 bn Saudi firm had made a commitment to Rain’s USD 25 mn series A round. The round was joined by existing institutional investors and angel investors including Buckley Ventures, and Loup Ventures.

What’s Rain? Altman-backed Rain is looking to design AI chips modeled on the human brain and claims that its technology will make AI “radically” more affordable. It is backed by OpenAI impresario Sam Altman.

The move could throw a wrench into Altman’s plan to raise more capital in the GCC for a separate chipmaking venture. Altman was reported to be working to line up investment from the Middle East for a potential chip venture code-named Tigris that aims to compete with semiconductor giant Nvidia.

Key words: Chips + China? Tensions between Washington and Beijing over semiconductors have been on the rise for a while now, with the Biden administration broadening the list of AI chips banned from export to China back in October. That promoted China to tighten export controls on graphite, a material essential to the construction of batteries used in electric cars and other green energy systems. EnterpriseAM Egypt has the breakdown here.

Protectionism isn’t only in tech: UK Culture Secretary Lucy Frazer has raised a barrier to the takeover by Abu Dhabi-based investors of newspapers the Telegraph and the Spectator with a “public interest intervention notice.” The notice cites preserving editorial independence as a major concern and directs UK communications regulator Ofcom to investigate whether the takeover by RedBird IMI would have an impact on freedom of the press in the UK.

BACKGROUND- Abu-Dhabi-backed RedBird IMI, run by former CNN boss Jeff Zucker, last month offered USD 750 mn to the owners of the Telegraph and Spectator with pledge to pay down debt the controlling family owed to Lloyds.

Companies from some countries are exempt from CFIUS review, including the UK and New Zealand (pdf). Other Western countries have similar mechanisms restricting investment including the UK’s National Security and Investment Act, Canada’s Investment Canada Act, and Australia’s Foreign Investment Review Board.

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