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Race is on for AI chips as nations seek tech supremacy

AI chips Reuters/Rick Wilking
Nvidia CEO Jensen Huang: The AI chip supplier is in massive demand from Gulf nations seeking tech dominance
  • AI surge causing supply shortages at chipmaker Nvidia
  • Saudi Arabia and UAE are buying up chips
  • Rivalry over tech causing tensions between US and China

The Gulf states are expected to invest heavily in powerful semiconductor chips in the years ahead in order to drive artificial intelligence forward.

AI technology is critical to developing global influence, and the high-performance chips – known as graphics processing units (GPUs) – process vast amounts of data much faster than traditional computer components.

The computer power they provide makes them vital for building AI products like advanced large language model (LLM) chatbot ChatGPT.

US chipmaker Nvidia – the world’s most valuable manufacturer worth nearly $1 trillion – dominates the market for GPUs, holding a 95 percent market share.

The AI surge has caused a huge supply shortage of Nvidia’s semiconductors, resulting in long waiting lists.

Fellow US rival AMD and other chip manufacturers have made significant strides in GPU technology, but Nvidia’s GPUs are the preferred choice for many developers and organisations. 

“The availability, pricing and geopolitics of access to AI chips may well start to look a lot like oil,” UAE technology consultant Carrington Malin told AGBI.

“One only has to look at the US-China decoupling over the past five years.”

AI chips NvidiaNvidia/Handout via Reuters
Nvidia’s dominance in the AI chip market has made it the world’s most valuable manufacturer, worth nearly $1trn

Competition over tech has caused tensions between the US and China, with Washington seeking to restrict China’s access to semiconductors.

US tech giant Intel called off a $5.4 billion acquisition of an Israeli chip manufacturer this week after Chinese regulators failed to sign off a big export deal.

The Financial Times reported last week that Chinese tech giants have ordered $5 billion worth of Nvidia’s GPUs amid fears that the Biden administration will restrict their access to US exports.

Demand for AI chips in the Gulf

Malin expects two of the world’s fastest growing users of AI – the UAE and Saudi Arabia – to buy “thousands” of AI chips per year.

“The biggest supercomputer order announced in the past year was from King Abdullah University of Science and Technology in Saudi Arabia,” he said.

“Its Shaheen III system alone will ultimately use 2,800 Nvidia Grace Hopper Superchips.”

Saudi Arabia has bought at least 3,000 of Nvidia’s H100 chips costing around $40,000 each, while the UAE has also secured access to thousands of Nvidia chips, according to the Financial Times.

In May Abu Dhabi made Falcon 40B available for research and commercial use – Falcon 40B being a foundational LLM with 40 billion parameters, trained on 1 trillion tokens.

“With competition for AI chips getting fierce, it pays buyers to have a long-term forecast of required compute capacity,” Malin said.

But many countries do not have the vision, budget or resources to commit to orders far in advance, he added.

Deepak Padmanabhan, partner at Dubai strategic advisory firm TenTen100, said the UAE is likely “augmenting its capacity” of GPUs.

Prashant Gulati, an angel investor in Dubai, likened the race to buy the chips to “buying fighter jets”.

“Countries are picking up weaponry to fight the next frontier, which is AI,” Gulati said.

“In the next generation of geopolitics, the size of the country may not be a measure for power. A country like the UAE with 10 million people could punch weight as big as a country far bigger in size.”

Who is Jensen Huang?

Born Jen-Hsun Huang, the Taiwanese-American billionaire co-founded Nvidia in 1993, aged 30, after earlier successes as an electrical engineer.

Based in California, Nvidia is now worth nearly $1 trillion, dominating the global market for AI chips, or graphic processing units (GPUs).

Nvidia’s groundbreaking GPU, dubbed GeForce, has helped revolutionise computing, and the company’s products are widely used in engineering, architecture, entertainment, automobiles, manufacturing and research.

Huang, who was voted Businessperson of the Year by Fortune in 2019, gifted Standford University, his alma mater, $30 million for a Jen-Hsun Huang School of Engineering Center.