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US AI chip restriction impact on GCC uncertain

16 January 2025

 

The impact of a US regulation restricting access to US-made integrated circuits (chips) designed for advanced artificial intelligence (AI) applications on the GCC states aiming to build massive data centre facilities is unclear.

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

“You don’t want to have a situation where the UAE will have to choose between one or the other,” said Michael Liebreich, managing partner at UK-based EcoPragma Capital, referring to China, a major UAE energy partner, and the US, a key political ally.

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 and improve efficiencies in line with their economic diversification agendas.

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, seen by some experts as essentially including AI as part of the US defence strategy, 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.

Restriction to drive efficiency

Such restrictions could have the unintended consequence of driving extreme efficiency in algorithms, according to Liebreich.

“If the US is restricting access to GPUs, then there will be an enormous focus on innovation around efficiency,” he said, adding that data centres consume a lot of energy and “we have got to a point where we can build massive data centres so quickly due to the availability of extremely fast chips and [low] energy costs”.

If the US restrictions come into force, it could result in higher efficiencies and show “how much, and how clever can we be with the smallest amount of resources”.

Another potential consequence is for middle-tier countries to start developing their own, possibly competitive chip manufacturing, notes Alicia Eastman, founder and managing director of UK-based APC Investors.

Eastman, who is also a board member of Singapore-based green hydrogen investor InterContinental Energy, says that “the regulation can obviously be altered under Trump”.

Data centre construction boom

The Middle East data centre market is experiencing rapid growth, driven by increased digital adoption and internet access. The region’s 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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