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Some officials from the Trump administration are holding up efforts to finalize a deal that would let the United Arab Emirates buy billions of dollars of Nvidia’s AI chips due to national-security concerns, The Wall Street Journal reported, citing people with knowledge of the matter.
President Donald Trump announced the tentative agreement during his visit to the Middle East in May, and the sides hoped to work out the details quickly. However, the two countries have not been able to hammer out the specifics of the deal to date, partly because some U.S. officials have expressed concerns that China could get access to the advanced U.S. technology, the report added.
The disagreement may not be resolved unless the U.A.E. agrees to different terms to address the U.S. officials’ concerns related to national-security, according to the report.
The officials have discussed, for example, cutting off direct access to chips by Abu Dhabi-based AI startup G4, which was expected to get access to about 20% of the chips as part of the deal.
Now, the Commerce Department does not intend to approve chips going to G42, though it may in the future, the report added.
Nvidia, the U.S. Department of Commerce, G42, OpenAI and Microsoft did not immediately respond to a request for comment from Seeking Alpha.
Commerce Secretary Howard Lutnick “is confident that the implementation plan for the deal signed in the Emirates will continue on time and on schedule,” a spokesman said, the report noted.
U.A.E. officials have also shown optimism about the discussions. The deal “will deliver enormous benefits to both countries,” the U.A.E.’s ambassador to the U.S., Yousef Al Otaiba, said in a statement, the report added.
On Tuesday, Lutnick and other U.S. officials met with representatives from the U.A.E. at a tech and energy event in Pittsburgh and talked about how to move the agreement forward, as per the report.
However, the slow speed has pitted administration officials against each other and frustrated some tech-industry executives looking to ramp up their AI businesses overseas, according to the report.
Nvidia’s CEO told President Donald Trump about the importance of the deal during a recent meeting, the report stated.
Some administration officials are concerned that Chinese tech giant Huawei Technologies, which has been trying to sell chips in the Middle East, could capitalize on the delay.
At the heart of the matter related to the holdup are some of the most advanced semiconductors available, chips from Nvidia that would power AI data centers.
Last month also it was reported that the multi-billion dollar deal to build data centers for AI, Stargate UAE, using U.S. technology is far from being completed due to continuous concerns related to security.
Nvidia (NASDAQ:NVDA), Oracle (NYSE:ORCL), OpenAI, Cisco Systems (NASDAQ:CSCO), SoftBank Group (OTCPK:SFTBY) (OTCPK:SFTBF) and G42 are collaborating to build Stargate UAE, plans for which were announced in May following Trump’s visit to the country.
OpenAI and G42 are both backed by Microsoft (NASDAQ:MSFT).
Under the tentative terms, the U.A.E. would get hundreds of thousands of Nvidia chips over years and help build data centers. Most of the chips would go to U.S. tech companies operating the data centers.
OpenAI and Microsoft are among the companies which are expected to operate data centers in the U.A.E. To have chips exported to the U.A.E., the companies would require licenses that would likely have to be approved by several U.S. departments, a process that could increase scrutiny of the national-security implications, the WSJ report noted.
Besides getting earmarked for 20% of the chips in the tentative deal, G42 could also have some involvement in the U.A.E. data centers operated by U.S. companies, the report added.
Some U.S. officials have shown concerns that China could find ways to access the advanced chips via G42 or other U.A.E. entities and personnel involved in the project, the report noted.
Changing the terms to no longer send chips directly to G42 could anger the U.A.E., which sees the deal as important to keeping pace in AI and saw G42’s involvement as a central part of the framework agreed to in May, according to the report.
“If we don’t provide the technology, then our global competitors will,” said White House AI czar David Sacks at the summit in Pittsburgh, adding that concern about chips being diverted “has been wildly blown out of proportion.”
Sacks was among the lead architects of the U.S.-U.A.E. chip agreement, while Lutnick helped close the agreement. Officials from the two countries who were supposed to move the chip deal forward set the details have barely met since the deal was signed, the report added.