Saudi Arabia’s AI Pivot: Reshaping the Kingdom’s Geopolitical Influence and Transforming the US-China Trade War

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While the US and China are embroiled in the global Artificial Intelligence race, Saudi Arabia is positioning itself as the new contender for global leadership in the AI industry as it builds the infrastructure to enter other key sectors of rare earths and semiconductors. This comes in light of Riyadh’s goals to diversify its economy away from oil revenues as downward pressure on oil prices strains public expenditure, proving overreliance to be greatly unsustainable. 

Crucially, Saudi Arabia’s shift towards developing its competitive advantage in strategic sectors that lie in the heart of global economic trends such as artificial intelligence, rare earths and semiconductors, has global consequences on two main fronts. Firstly, Saudi Arabia’s ambitions for global dominance in AI are strategic in increasing the kingdom’s international standing, through prominence in a rapidly growing sector with significant investments. Secondly, the realisation of this AI pivot through a deepening partnership with the US is reshaping the dynamics of the global trade war between the US and China, providing the US with a ready trade partner that improves Washington’s leverage amidst mounting trade tensions.  

In line with Saudi Arabia Vision 2030, the national transformative blueprint anchored on three main themes of “a vibrant society”, “a thriving economy” and “an ambitious nation” is steering the kingdom towards diversification and innovation. 

One key step was through harnessing its near-$1 trillion Public Investment Fund (PIF) to fund Humain, an AI-focused venture. At the US-Saudi Investment Forum, Humain led a $900 million funding round in California-based Luma AI to accelerate the algorithm’s efforts to train large-scale “World Models”, the newest AI revolution after Large Language Models (LLMs). This is a first step towards realising Riyadh's $50 billion budget for the industry, proving its commitment towards cultivating a technology-forward economy. The momentum and magnitude of the AI race is further demonstrated by the participation of Big Tech groups like Google DeepMind, Meta and Nvidia, and start-ups like Fei Fei Li’s World Labs, pumping billions into the race towards achieving machine “superintelligence”.  

Beyond entering the global AI race, Humain is building a moat in the AI industry through HUMAIN Create, an initiative to build “culturally aligned” AI models trained on Arabic and regional data. According to Humain’s chief executive, Tareq Amin, this aligns with a key tenet of Humain’s vision: the scaling and setting of a new benchmark for AI at a “frontier level”. By incorporating considerations of cultural context, visual nuance, linguistic diversity and Arabic “identit(ies), values and sovereignty” in training Luma AI’s models, Saudi Arabia gains a first-mover advantage in constructing new capabilities for algorithmic models.  

Vision 2030 and Saudi Arabia’s bet on AI goes deeper than the adoption of new technologies or economic diversification. The kingdom is rewriting its narrative from oil and energy dependency towards becoming the world’s hub of innovation, investments and influence. Complemented by the NEOM giga-project, Saudi Arabia’s futuristic modern city incorporates AI, tourism and a strategic industrial port. As a result, Saudi Arabia is growing its soft power through reinventing itself as an emerging prominent actor in AI. Additionally, in becoming a key market and investor in American AI firms, previous oil-for-security arrangements between Saudi Arabia and the US are being transformed through the kingdom’s capitalising on its new technological leverage to maximise its autonomy in relations with the US. 

From a regional standpoint, Carnegie Endowment’s analysis of Saudi Arabia’s AI ambitions reveals spillover effects of increasing the dependence of poorer Middle Eastern and North African (MENA) states while strengthening the kingdom’s bargaining power. Saudi Arabia’s advanced AI capabilities and infrastructure attract capital, investment, and technology, all while widening economic disparities with lower-income MENA countries. As a result, these countries become more dependent on AI innovations from the Gulf Cooperation Council (GCC) for their own modernisation efforts. This asymmetry risks the acceleration of regional marginalisation of these lower-income MENA countries, undermining their “political and foreign policy autonomy”. Furthermore, investments in AI improve Saudi Arabia’s intelligence and military capabilities, which have enabled its partnership with the UN in advancing global cybersecurity. This props up the kingdom’s surveillance capacity and strategic relevance. 

The geopolitical impacts of Saudi Arabia’s AI pivot extend to the US-China trade war. Enhanced cooperation with the US in rare earths and semiconductors alters the strategic balance between the US and China by giving the US an alternative trading partner, strengthening Washington's bargaining power and strategic positioning amidst trade tensions with Beijing.  

China is the primary supplier for 24 of 50 critical minerals, accounting for 70% of global production of rare earth oxides. America’s vulnerability to China’s dominance in the sector is further exacerbated by the downward pricing pressure from the global supply surplus from Chinese firms, forcing the closure of nickel projects in Australia and New Caledonia. This increases US reliance on Chinese rare-earth exports. With China’s growing monopoly over rare earth supplies and tightening export controls on the US, reshoring rare earths through developing new partnerships is crucial in ensuring that China’s export restrictions do not undermine American national, technological and energy security.  

Here, the triad partnership between Nevada-based MP Materials, a rare earths group, the US military and Saudi Arabia’s state mining company, Maaden, serves America’s strategic interest in strengthening and diversifying resilient supply chains. Maaden aims to flex its financial muscle of a $2.5 trillion mining budget into the joint venture to build a processing facility in Saudi Arabia that will supply raw materials to American and Saudi manufacturing and defence industries. MP Materials and the US government’s combined share of 49% in this venture accords greater stability and resilience in the supply of heavy and light rare earths to the US. Hence, in forming a strategic alliance with Saudi Arabia, an alternative for the production and processing of rare earths, the US is better able to counterbalance China’s significant comparative advantage in the mining industry.  

In the semiconductors sector, the US has also secured a deal with Saudi Arabia for US firms like Nvidia, OpenAI and Oracle to supply the kingdom with advanced AI chips: Nvidia’s official news release reveals plans to deploy “several hundred thousand” of Nvidia’s most advanced Graphics Processing Units (GPUs) over five years, while the export of semiconductors equivalent of up to 35,000 Nvidia Blackwell chips was authorised in late November 2025. Moreover, “rigorous security and reporting requirements” needed for such deals have committed Saudi Arabia to meet the US in its concerns over keeping semiconductors out of China’s reach, pushing the Gulf Kingdom into further strategic alignment with the USA.    

The Strategic Artificial Intelligence Partnership between Riyadh and Washington provides a large and steady alternative demand for advanced semiconductors from US chipmakers. In doing so, US firms enjoy extra benefits while alleviating the economic impact of America’s restrictions on exports to Chinese buyers. Overall, this props up America’s position in the semiconductor trade rivalry with China, enabling the US to continue limiting the supply of semiconductors to China without American firms suffering a hefty loss in demand. This tips the scales in America’s favour by reinforcing its advantage in semiconductor supply chains, all while bringing a major partner with a natural competitive advantage in land, energy resources, and geographic location under its strategic influence. 

In sum, Saudi Arabia’s AI pivot and Vision 2030 have global implications on two significant fronts. Firstly, in setting its sights on becoming a global leader in AI, Saudi Arabia is increasing its international prominence in the world’s most dynamic, competitive and closely-watched sector. This reifies the Gulf kingdom’s soft power and regional influence, both of which help the monarchy realise its transformative blueprint for diversification and innovation. Secondly, partnerships with the US in rare earths and semiconductors to support the kingdom’s AI ventures have favoured the US in providing a ready source of demand and supply, reshaping the global order by introducing a third player into what was once a bipolar war. Saudi Arabia’s pursuit of dominance in AI is therefore not just a matter of domestic revitalisation, but also has wider strategic consequences for regional and global power dynamics. 

Written by Emma-Ruth Oh

Edited by Rana Zeidan