A proposed deal for the United Arab Emirates (UAE) to purchase billions of dollars’ worth of AI chips from Nvidia and other US semiconductor companies has been delayed due to national security concerns, according to The Wall Street Journal.

US officials worry the chips could be diverted to China despite earlier assurances from UAE and Saudi Arabia.

The delay reflects broader US efforts to tighten AI chip exports to sensitive regions.

Recently, Malaysia implemented an export permit requirement for US-made AI chips.

There are reports that the Trump administration is considering similar restrictions for Malaysia and Thailand.

Talks over the UAE deal are still ongoing and have not reached a final agreement.

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🔗 Source: TechCrunch

🧠 Food for thought

1️⃣ Middle Eastern nations pursuing AI dominance face heightened scrutiny amid export control risks

The UAE-US chip deal pause reflects the collision between regional AI ambitions and geopolitical security concerns.

Economic projections show what’s at stake for the UAE. Accenture analysis indicates the country could generate $182 billion in added economic value through AI adoption by 2035, with financial services, healthcare, and transportation as the primary beneficiaries 1.

This explains why securing advanced AI chips has become a strategic priority for Middle Eastern nations pursuing technological advancement, despite the increasing export complications.

Concerns about chips potentially reaching China aren’t isolated to this deal. Growing evidence of chip smuggling has prompted similar restrictions elsewhere, with Malaysia recently implementing a Strategic Trade Permit system specifically for high-performance AI chips 2.

For the UAE, the stalled deal threatens not just immediate technology access but longer-term competitiveness in their AI-powered economic transformation initiatives.

2️⃣ Global AI chip controls reveal enforcement challenges in complex supply chains

The UAE situation highlights a persistent challenge in semiconductor export controls: ensuring advanced technology doesn’t reach restricted destinations through third-party transfers.

The concern about AI chips reaching China through intermediary countries reflects documented challenges in preventing semiconductor smuggling, with active markets for restricted technology emerging despite export controls 3.

This enforcement difficulty has prompted the US to expand its export control focus beyond direct sales to China, with Thailand and Malaysia also facing potential restrictions as suspected transshipment hubs 2.

Recent regulatory responses demonstrate the evolving approach to this challenge, with Malaysia’s new permit requirements for US AI chips representing a collaborative attempt to address smuggling concerns while maintaining legitimate access 2.

These developments illustrate how supply chain security has become a critical consideration in global AI chip distribution, forcing both exporters and importers to implement more robust tracking and verification systems.

3️⃣ Technology access increasingly functions as a geopolitical lever in international relations

The UAE deal complications exemplify how advanced technology access has become deeply intertwined with national security considerations and diplomatic positioning.

China’s declaration of becoming an AI leader by 2030 and its $150 billion AI industry development goals have intensified US concerns about technology transfer, making even allied nations’ access to cutting-edge chips subject to heightened scrutiny 4.

This has created a multi-tiered system of technology access, with the US implementing differentiated export controls that favor certain countries while restricting others—a policy that has generated significant diplomatic tension, particularly with EU nations 5.

The impact extends beyond government relations to reshaping market dynamics, with companies like Nvidia and AMD facing potential revenue losses as they navigate increasingly complex regulatory landscapes 6.

These developments signal a fundamental shift where control of critical technologies like AI chips functions as a powerful tool in international relations, influencing both diplomatic engagement and economic partnerships.

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