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AI chip restriction may slow down GCC data centre boom

20 January 2025

Commentary
Jennifer Aguinaldo
Energy & technology editor

A US regulation restricting access to US-made integrated circuits (chips) designed for advanced artificial intelligence (AI) applications could slow down ongoing plans to build substantial data centre capacity in the GCC states.

According to a senior executive with a data centre operator, there are currently no viable alternative suppliers for advanced graphics processing units (GPUs) apart from the US.

“China is roughly two years behind the US in terms of these technologies,” the source told MEED. “There is no doubt China can adapt and improve their technology pace rapidly, but there is still a significant lag.” 

GPUs are crucial to building hyperscale data centres catering to advanced AI applications.

Their lack of availability could impede some GCC states’ momentum to build massive data centre facilities over the next few years as part of their national economic diversification and AI strategies.

Chips exports

In December, the US government approved the export of advanced AI chips to a Microsoft-operated facility in the UAE as part of the company’s partnership with UAE-based AI firm G42, according to US-based news website Axios.

The report did not specify the volume of chips approved for export to the UAE.

This followed an announcement in April 2024 that Microsoft had agreed to invest $1.5bn in G42.

At the time, the companies said the investment would bring the latest Microsoft AI technologies and skilling initiatives to the UAE and other countries in the Middle East, Central Asia and Africa, with Brad Smith, vice chair and president of Microsoft, joining the G42 board of directors.

In September last year, the Saudi Data and Artificial Intelligence Authority (SDAIA) and US-headquartered AI microprocessor giant Nvidia confirmed a plan to establish “the largest high-performance data centre infrastructure in the Middle East and North Africa region” in Saudi Arabia.

The project will expand SDAIA’s existing supercomputing infrastructure in Riyadh. The planned expansion is expected to integrate Nvidia’s most advanced technologies, including the upcoming Nvidia Blackwell architecture, and eventually grow to over 5,000 GPUs.

AI as part of US defence strategy 

The White House issued a brief on the final draft of the regulation on 13 January, a few days before President Joe Biden’s departure and President-elect Donald Trump’s inauguration.

The regulation is designed to restrict access to powerful GPUs, presumably to prevent third countries from inadvertently passing on or re-exporting these devices to China, given their ongoing power race over AI.

Seen by some experts as essentially including AI in the US defence strategy, the regulation creates three tiers of countries in terms of access to these chips.

The first tier comprises 18 countries that can buy GPU chips without limits. These are Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, the Republic of Korea, Spain, Sweden, Taiwan and the UK.

The third tier comprises countries of concern, including Macau (China) and Russia, according to some reports.

All other nations and states, including those in the GCC, are presumed to be mid-tier countries, where a cap of approximately 50,000 GPUs between 2025 and 2027 will apply.

Individual companies from these countries will be able to achieve higher computing capability if they comply with US regulations and obtain validated end user (VEU) status.

Data centre construction boom

Some GCC states, including the UAE, Saudi Arabia and Qatar, have a booming data centre market, thanks to their governments’ drive to set up regional AI hubs, increase digital adoption and improve efficiencies in line with their economic diversification agendas. 

The Middle East data centre construction market is projected to reach $4.39bn by 2029, growing at a compound annual growth rate of 10.99%. 

According to GlobalData, total investment in data centres globally reached $70.6bn in 2024 and is projected to grow by 5% to $74.3bn in 2025.

Photo credit: Pixabay (for illustrative purposes only)

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Jennifer Aguinaldo

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