While the US announced significant tech investments in the Middle East, China has been silently establishing a dominant digital infrastructure across the region for years, supplying AI governance tools and powering smart city surveillance and telecom networks for countries like Saudi Arabia, the UAE, Qatar, and Bahrain, with Chinese firms like Huawei and SenseTime playing central roles in key projects like Saudi Arabia's NEOM smart city. The US has attempted to counter this influence by leveraging advanced chip sales as diplomatic leverage, successfully prompting some Gulf AI players to sever ties with Chinese companies like Huawei, but this reversal is fragile as existing Chinese infrastructure and data pipelines remain in place, and China's burgeoning open-source AI models offer Gulf nations a powerful, geopolitically unencumbered alternative for AI deployment, leading the Gulf states to adopt a strategy of calculated strategic ambiguity, extracting value from the US-China rivalry by hedging their alignment and maintaining financial firepower and strategic autonomy rather than making a binary choice between the two superpowers.

While the US announced significant tech investments in the Middle East, China has been silently establishing a dominant digital infrastructure across the region for years, supplying AI governance tools and powering smart city surveillance and telecom networks for countries like Saudi Arabia, the UAE, Qatar, and Bahrain, with Chinese firms like Huawei and SenseTime playing central roles in key projects like Saudi Arabia's NEOM smart city. The US has attempted to counter this influence by leveraging advanced chip sales as diplomatic leverage, successfully prompting some Gulf AI players to sever ties with Chinese companies like Huawei, but this reversal is fragile as existing Chinese infrastructure and data pipelines remain in place, and China's burgeoning open-source AI models offer Gulf nations a powerful, geopolitically unencumbered alternative for AI deployment, leading the Gulf states to adopt a strategy of calculated strategic ambiguity, extracting value from the US-China rivalry by hedging their alignment and maintaining financial firepower and strategic autonomy rather than making a binary choice between the two superpowers.

While the US announced significant tech investments in the Middle East, China has been silently establishing a dominant digital infrastructure across the region for years, supplying AI governance tools and powering smart city surveillance and telecom networks for countries like Saudi Arabia, the UAE, Qatar, and Bahrain, with Chinese firms like Huawei and SenseTime playing central roles in key projects like Saudi Arabia's NEOM smart city. The US has attempted to counter this influence by leveraging advanced chip sales as diplomatic leverage, successfully prompting some Gulf AI players to sever ties with Chinese companies like Huawei, but this reversal is fragile as existing Chinese infrastructure and data pipelines remain in place, and China's burgeoning open-source AI models offer Gulf nations a powerful, geopolitically unencumbered alternative for AI deployment, leading the Gulf states to adopt a strategy of calculated strategic ambiguity, extracting value from the US-China rivalry by hedging their alignment and maintaining financial firepower and strategic autonomy rather than making a binary choice between the two superpowers.

When US President Donald Trump landed in Riyadh last year, the announcements made were nothing short of a Silicon Valley fantasy. Saudi Arabia’s $600 billion commitment to American tech firms, a planned AI campus in Abu Dhabi, which is the largest outside the US and pledges totalling $2 trillion across the Gulf, depicted that Washington had locked up the Middle East’s digital future.

Though not invited, Beijing was already inside the Gulf’s digital ecosystem. For nearly a decade, Chinese tech giants have been silently building data centres, administering smart city surveillance, powering the telecom networks and exporting AI governance tools across not just Saudi Arabia, but the UAE, Qatar and Bahrain. As data becomes the new oil and the battle for digital infrastructure is as consequential as any military alliance, the Middle East is no exception to the growing Sino-US rivalry.

Sino-Gulf digital engagement: A low-key affair

The Chinese presence in the Gulf is not speculative, but structural. Huawei has established deep partnerships with the region's largest telecom operators, including STC in Saudi Arabia, Ooredoo in Qatar and Du in the UAE, developing cloud, 5G and AI-powered digital solutions, across these networks. Last year, Alibaba opened a new data centre in Dubai, while Tencent committed $150 million to Saudi cloud infrastructure. Huawei, on its part, has planned investments of $400 million in Saudi Arabia's cloud region by 2028.

Utkarsha Mahajan

Most consequentially, Chinese AI companies SenseTime and Huawei have become central to the NEOM smart city project, a part of Saudi Arabia's flagship Vision 2030 development. Their algorithms manage urban surveillance, behavioural analytics and data governance for what is intended to be a model of 21st-century statecraft. When a government builds its future city on your data architecture, the leverage is structural, not merely commercial.

Wendy Robinson, an analyst at the Washington Institute, called this China's "Serbia model", the systematic export of surveillance-capable AI infrastructure to governments that prioritise stability and social control, creating long-term dependencies that outlast any single contract. The same playbook has been deployed across Africa for a while, which is now running at scale in the Gulf as well.

The American countermove

Washington has eventually recognised the threat. The US Commerce Department approved the sale of 70,000 advanced Nvidia processors to the UAE and Saudi Arabia, but only after G42, the UAE's flagship AI company, severed ties with Huawei and divested from ByteDance and after Saudi Arabia's Humain pledged not to purchase Huawei equipment. Advanced chips, in effect, were weaponised as diplomatic leverage. It worked, but only partially. The Gulf's wealthiest AI players now have access to the world's most powerful processors and their public rhetoric has pivoted firmly toward American partnerships. "Our technology ecosystem today is firmly anchored in partnerships with US and allied companies," one Gulf executive declared. But the reversal is more fragile than it appears. Chinese influence did not vanish because G42 changed its partnership agreements. Huawei's telecommunications infrastructure still underpins regional 5G networks. SenseTime's algorithms still run in smart city deployments. The data pipelines already built do not get switched off by a press release.

The Chinese comeback: Open-source wild card

There is a dimension to this contest that Washington's chip strategy cannot easily counter: the rise of Chinese open-source AI models. DeepSeek's R1 model, released in early 2025, reportedly trained for just $5.6 million, a fraction of what comparable American models cost and is freely available for download and deployment. It requires no chip-supply agreement, no American export license and no bilateral deal.

For cash-rich but sovereignty-conscious Gulf governments that want AI capabilities without geopolitical strings attached, open-source Chinese models offer an attractive third option—free, powerful and deployable on existing infrastructure. The chip war may have secured the high-end frontier, but the middle layer, where most governance, health and urban AI actually runs, remains wide open.

The Gulf's calculated strategic ambiguity

What emerges from this landscape is not a binary choice between Washington and Beijing, but a deliberate strategy of hedged alignment. Gulf states have become experts at extracting maximum value from superpower rivalry i.e., US chips for frontier AI, Chinese infrastructure for smart cities and strategically sovereign wealth funds investing in both simultaneously.

This is not fence-sitting. It is statecraft. Here, the deeper question for both Washington and Beijing is whether infrastructure dependency, once built, eventually converts into political influence or whether the Gulf's financial firepower and strategic autonomy are sufficient to keep both powers at arm's length for a longer time.

The sands of the Middle East have absorbed many empires' ambitions. The digital dragon and eagle have arrived. Who adapts best to the deserts and on whose terms, will decide the direction of the technological pivot for the next decade.

The author is a PhD candidate, SIU-JRF, Symbiosis School of International Studies, Symbiosis International (Deemed) University, Pune.

TAGS