From oil to algorithms: Why a new front is emerging in global AI race

13 June 2025

In a year saturated with billion-dollar headlines, recent deals involving the UAE and Saudi Arabia stand out — not just for their size, but because they boost the region’s entrepreneurial ambitions.

These include the potential annual supply of 500,000 Nvidia AI chips to the Emirates and the construction of a chipset design center in Saudi Arabia.^[1]^/[2] Humain, a state-backed AI technology company in Saudi Arabia, plans to build ‘AI factories’ and has announced it will buy “several hundred thousand” Nvidia chips in the coming years.^[3] Abu Dhabi is also planning what could become the world’s largest AI data center cluster outside the United States — potentially rivaling Stargate, the OpenAI-SoftBank initiative.^[4]^/^[5]

With growing influx of technology talent, a third pole in AI innovation, alongside the US and China, may be emerging in the Middle East. The region offers cheap energy, low-latency digital connectivity to half the world’s population within a 2,000-mile radius (key for AI queries that require ultra-fast responses and high reliability), and it has become a magnet for entrepreneurial professionals.^[6] LinkedIn data shows both the UAE and Saudi Arabia were among the global top destinations for AI talent between 2019 and 2024, and the former topped a global entrepreneurship ranking for four consecutive years.^[7]^/^[8]

These developments bring the Gulf closer to its long-standing goal of transitioning to a post-oil, knowledge-based economy. Crucially, the shift isn’t limited to just the AI sector — other parts of the economy are developing at a rapid clip as well. Oil accounted for just over a quarter of the UAE’s economy in the first nine months of 2023, while non-oil exports made up 18.7% of total trade, up from 11% in 2015.^[9]^/^[10] In Saudi Arabia, non-oil activities contributed more than half of GDP last year.^[11] However, funding is a key constraint: it’s estimated that there is a US$250 billion financing gap for small and medium enterprises across the Gulf region.^[12] Business owners will increasingly need to turn to alternative forms of credit.

From infrastructure to innovation

Successful nations continually reinvent themselves — like Singapore as a finance hub or Korea as a smart tech leader. The UAE began laying AI foundations early, establishing the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) in 2019, well before ChatGPT arrived. Last month, the university announced it would open a center in Silicon Valley, boosting US-Gulf knowledge exchange.^[13]

AI-focused innovations have already taken place in the region. Last month, the UAE unveiled Falcon Arabic, a large language model developed by the government-backed Technology Innovation Institute to serve Arabic speakers.^[14] It could provide a key advantage in sectors where Western models often fall short — like healthcare, finance, and public services — due to missed cultural or linguistic nuances.^[15] Other applied AI ventures include M42, which is improving disease screening, and RoboWell, which is enhancing oilfield performance.^[16]^/^[17]

Dubai-based firms are also deploying AI at scale. Payroll platform Bayzat uses machine learning to automate HR and insurance, while ride-hailing platform Careem has integrated advanced algorithms to optimize transport across MENAP.^[18] Dubai and Abu Dhabi already host more than 1,200 AI firms.^[19] The number is set to grow: a recent survey found 94% of UAE enterprises believe AI will drive long-term growth, with nearly half expecting ROI within two years.^[20]

More significantly, the AI economy can help turn local firms into regional champions. The region’s firms have the potential to tap overseas markets, helped in part by investment in regional data infrastructure and in funding rounds for promising start-ups involving moneyed funds domiciled in the region. MGX, an Abu Dhabi-based investment firm, plans to funnel US$100 billion into AI and semiconductor deals.^[21] Saudi Arabia’s Humain has similarly announced a US$10 billion venture fund targeting start-ups across the US, Europe, and parts of Asia.^[22] Emirati AI firm G42 is rapidly building out data centers across Africa.^[23] These moves could enable UAE and Saudi Arabia-based businesses enter new markets as key service and infrastructure partners.

Yet, while infrastructure and institutional support are growing, traditional credit providers can be slow to adapt. Entrepreneurs still cite financing as a major barrier. For example, loans to small businesses accounted for less than 7% of overall corporate lending in 2021 in Saudi Arabia.^[24] Securities financing — which allows founders or shareholders to borrow against their holdings — could help bridge this gap without forcing equity dilution.

Startups and investors alike must prepare to explore new financing channels to match the pace of AI development. The ecosystem may be rapidly evolving, but ensuring liquidity and access to capital is essential for translating ambition into execution.

In a region once reliant on hydrocarbons, data has become the new currency — and AI the engine refining it.

[1] https://www.qualcomm.com/news/releases/2025/05/qualcomm-and-humain-to-develop-state-of-the-art-ai-data-centers-

[2] https://www.reuters.com/business/finance/us-close-letting-uae-import-millions-nvidias-ai-chips-sources-say-2025-05-14/

[3] https://nvidianews.nvidia.com/news/humain-and-nvidia-announce-strategic-partnership-to-build-ai-factories-of-the-future-in-saudi-arabia

[4] https://www.ft.com/content/4708c7a6-a26f-45a9-9a4f-25a9af4167df

[5] https://www.ft.com/content/4eaecb90-23f5-47c5-91a2-212497104a06

[6] https://ae.usembassy.gov/uae-and-us-presidents-attend-the-unveiling-of-phase-1-of-new-5gw-ai-campus-in-abu-dhabi/

[7] https://oecd.ai/en/data?selectedArea=ai-jobs-and-skills&selectedVisualization=between-country-ai-skills-migration

[8] https://gulfnews.com/business/markets/uae-tops-global-entrepreneurship-rankings-for-fourth-consecutive-year-1.500080499

[9] https://fcsc.gov.ae/press-release/#40695

[10] https://www.reuters.com/world/middle-east/uae-leans-trade-deals-growth-non-oil-trade-jumps-15-2024-2025-02-05/

[11] https://mep.gov.sa/en/media-center/news/minister-of-economy-and-planning-the-kingdom%E2%80%99s-comprehensive-gdp-update-reflects-the-strength-of-its-economy

[12] https://sponsored.bloomberg.com/article/FAB-First-Abu-Dhabi-Bank/Reshaping-SME-financing-in-the-UAE

[13] https://mbzuai.ac.ae/news/mbzuai-launches-institute-of-foundation-models-and-establishes-silicon-valley-ai-lab/

[14] https://www.bloomberg.com/news/articles/2025-05-21/uae-releases-falcon-arabic-ai-model-to-outcompete-mideast-rivals

[15] https://www.weforum.org/stories/2024/05/generative-ai-languages-llm/

[16] https://www.halliburton.com/en/about-us/press-release/world-first-ai-enabled-technology-successfully-implemented-by-aiq-and-halliburton-in-adnoc-upstream-operations

[17] https://www.bloomberg.com/news/articles/2024-11-11/abu-dhabi-eyes-more-deals-to-build-ai-powered-global-health-firm

[18] https://www.entrepreneur.com/en-ae/technology/scaling-smart-how-ai-solutions-help-dubai-startups-grow/485260

[19] https://restofworld.org/2025/golden-visa-ai-jobs-uae/

[20] https://news.sap.com/mena/2025/04/94-of-uae-enterprises-believe-ai-will-enable-long-term-growth/

[21] https://www.bloomberg.com/news/articles/2024-03-11/abu-dhabi-said-to-target-100-billion-aum-for-ai-investment-firm

[22] https://www.arabnews.com/node/2602454/business-economy

[23] https://www.g42.ai/resources/news/g42-and-kenyas-ecocloud-unveil-green-powered-mega-data-center-collaboration

[24] https://www.middle-east.kearney.com/industry/financial-services/article/small-but-mighty-why-banks-need-to-rethink-how-they-serve-smes

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