The midterm rally split the AI trade, and Gulf investors ended up on the losing side

US chip selloff hits Gulf outlook for AI returns: After a brief post-midterm rally on Wall Street, the Philadelphia Semiconductor Index closed down about 12.3% yesterday. Chipmakers and data center builders — both of which are in many Gulf sovereign wealth funds’ portfolios — led the selloff, with Nvidia down 7.5%, AMD down 14.6%, and Coreweave down 12.1%. Established technology companies had gained on Wednesday while data center developers fell, before the selling spread to semiconductors and the bigger technology names, Daniel Brett, head of research and data at Global SWF, tells EnterpriseAM.

The exposure runs across the AI stack. MGX holds equity in all three frontier labs: OpenAI, Anthropic and xAI, now part of SpaceX. It has also backed data center operator Aligned. QIA has backed three straight Anthropic rounds and US infrastructure builder Crusoe. PIF’s bets run through Humain and a stake of just under 1% in SpaceX. Global SWF estimates PIF’s identifiable AI exposure at USD 12 bn, or 1.3% of assets, and Mubadala’s at USD 24.3 bn, or 6.3%, Brett says.

The election put political pressure on the asset class itself, with opposition to data centers growing over electricity prices, water consumption, and the effect on local communities, Brett says. Long horizons let sovereign funds absorb volatility, but not overvaluation or infrastructure that fails to earn an adequate return. Big Gulf investors can take the losses, though they may pay “through reduced capacity to fund other opportunities,” Lusail University’s Hela Miniaoui tells AGBI.

Demand is lagging the spend. Only 13% of companies have scaled their AI projects in line with the original business case, according to a BearingPoint survey of 1k executives in Europe, the US and China. In the UAE, 72% of businesses now use AI, up from 53% a year ago, but only 31% of adopters run advanced AI.

Oil moved on the same vote. Brent fell 8.7% to USD 94.62 on Wednesday and steadied near USD 96 yesterday, on expectations the midterm result brings the US-Iran war closer to an end. Lower prices would constrain Gulf government finances, while an easing of the war would restore disrupted exports and relieve other pressures, Brett said.

Washington adds a variable: Congress doesn’t approve individual chip export licenses or foreign investment transactions, which sit with the Commerce Department and the executive branch. From January, Democratic committees can investigate the agreements behind the Gulf’s chip access, demand information, and examine security safeguards. They can seek tighter export-control legislation, amend investment screening rules, and shape enforcement budgets, with Trump holding a veto over new legislation, Brett tells us. Democratic lawmakers have already questioned the easing of export controls on the UAE, particularly over Chinese access to advanced processors and commercial relationships involving the Trump family, as we reported last week.

Restrictions on chip access and project delays are what would weaken returns, Brett says. Tighter security conditions, longer approvals, and higher compliance costs would not threaten the existing agreements. G42 and Humain both received conditional US approval in November 2025 to buy advanced Nvidia chips, subject to security and reporting requirements, and both lean heavily on American semiconductor technology. MGX’s risk sits in its US technology and infrastructure holdings, where scrutiny turns on governance rights and access to sensitive information.

Neither fund is likely to retreat from AI, but the uncertainty strengthens the case for staging commitments against confirmed chip access, secured electricity supply, construction milestones, and long-term customer contracts rather than capacity targets, Brett tells us. Building data centers outside the US would ease some construction and regulatory pressure without removing the dependence on American chips and technology partners.