Trump's AI deals in Gulf stir China fears back home

• The dealmaking flurry comes after the White House last week scrapped Biden administration rules limiting AI chip exports. A new policy is in the works but not yet in place.

Driving the news: The House Select Committee on the Chinese Communist Party on Thursday introduced new legislation "to stop advanced U.S. AI chips from falling into the hands of adversaries like the Chinese Communist Party (CCP)."

• The bipartisan Chip Security Act calls for the Commerce Department to require location verification for advanced AI chips and enforce mandatory reporting by chipmakers about any diversion of their chips to restricted companies or countries.
• Also on Thursday, the Department of Commerce announced a "UAE/U.S. Framework on Advanced Technology Cooperation," which includes "the launch of a 1GW AI data center, part of a planned 5GW UAE-US artificial intelligence technology cluster in Abu Dhabi to support regional computation demand ... while meeting robust US security standards and other efforts to responsibly deploy AI infrastructure, both in the UAE and globally."

Earlier this week, as Trump and tech titans announced deal after deal, the Bureau of Industry and Security at the Commerce Department issued new guidance saying the department has to approve the deals.

• A Commerce Department official told Axios the guidance aims to prevent U.S. adversaries from using workarounds to access U.S.-made chips, effectively saying any deals require approval from the department.

Catch up quick: Trump's trip to the Gulf has included a flood of AI-related deals.

• Nvidia said it will ship 18,000 of its advanced AI chips to Saudi Arabia for a 500 megawatt data center being built by Humain, a new AI infrastructure startup backed by the country's sovereign wealth fund.
• AMD — an Nvidia rival — also announced a $10 billion partnership with Humain while Qualcomm also signed a memorandum of understanding with the startup.
• Amazon and Humain are investing more than $5 billion in developing an "AI zone" in Saudi Arabia with Amazon Web Services infrastructure and servers, training programs and AI agents that will be used by the kingdom's government.

The intrigue: The Trump administration is reportedly considering a deal that would allow more than 1 million advanced AI chips to be exported to the UAE.

• That could open the door for other companies to expand their capacity in the Middle East: Bloomberg reported this week that OpenAI is weighing opening a data center in the UAE.

Yes, but: The deal announcements don't come with many details. It's unclear if there will be restrictions on who can access the chips on site and what they can be used for.

• White House AI czar David Sacks this week in Saudi Arabia advocated for a "partner ecosystem" around AI and called for fewer restrictions on chips.

What they're saying: "President Trump and his administration remain committed to making the United States a global leader in AI, while also ensuring our most advanced technology does not fall into the hands of our adversaries," National Security Council spokesperson James Hewitt told Axios in an email.

• "These goals are not mutually exclusive, and we look forward to working with industry leaders to accomplish both these missions."

Flashback: An "AI diffusion" rule issued in the final days of the Biden administration placed restrictions on the export of chips to most countries, including Saudi Arabia and the UAE.

• Nvidia, Microsoft and others pushed back hard on the rule, arguing it would stifle innovation and economic growth.

Between the lines: Both administrations, Biden and Trump, have faced continuing debates over whether to prioritize U.S. business dominance or national security.

• Right now, it looks like the business camp is out in front, and forging ahead with deals before clear policy guidelines are in place.

State of play: The U.S. and China lead the world in AI infrastructure and deploying AI models, but "the Gulf states have massive ambitions to be the third leg of the stool," says Jimmy Goodrich, a senior adviser to RAND for technology analysis.

• "They have the ambition and the funds, and they see AI as central to their economic survival because as the world reduces its carbon footprint, their geopolitical leverage decreases."
• The Gulf deals "suggest a shift away from multilateral coordination toward more transactional, bilateral diffusion diplomacy," Joseph Hoefer, government relations and AI principal at Monument Advocacy, told Axios. "With the diffusion rule being rolled back, it signals a move toward partnerships that prioritize short-term strategic and economic gains."

The near-term concern for some in Washington is that China could access advanced U.S.-made AI chips through Saudi Arabia, the UAE and other third-party countries.

• The UAE and China remain close economic partners in other sectors and maintain military ties.
• "We have to be realists and recognize that the Gulf states are always going to be hedging their bets and not picking a side," Goodrich says. "They aren't walking away from their economic and security relationship with China and they aren't walking away from the U.S."

In the longer term, the worry in D.C. is that U.S. companies might increasingly build the data centers that power AI development in the Gulf, where government subsidies could significantly cut the cost, rather than in the U.S.

• Goodrich says U.S. companies would most likely still be the largest chip users in the Middle East.
• But "whomever controls predominant share of computing will control the future of AI" and if the server racks, chips, and other computing components are "sitting thousands of miles away in the desert, how much control do you have?"
• "We've seen this movie before. For decades, foreign governments have subsidized our advanced tech to move abroad. Flat screens, semiconductors, solar and energy — it is not an unproven trend," he says.