Trump gives tech stocks their first Gulf-driven rally

A new "Trump trade" is driving the stock market during US President Donald Trump's visit to the Gulf.
Chipmakers' shares are soaring as investors bet that Gulf sovereign wealth funds are set to spend billions on their products, which Trump just freed from export controls.
Nvidia’s shares have risen nearly 10 percent since Trump touched down in the Middle East on Tuesday. Advanced Micro Devices' (AMD) shares are up about 10 percent as well. On Wednesday alone, Super Micro Computer Inc., a builder of data centres, was trading up about 12 percent.
The rally in American chipmakers and AI companies quantifies just how quickly the US’s relationship with the Gulf region is transforming.
Usually, when US presidents visit the oil-rich region, shares of traditional defence contractors rally as investors bet they will bag deals to sell Arab monarchs missiles and jet fighters.
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That decades-old relationship was summed up famously by a fictional Arab Gulf prince in the 2005 geopolitical thriller Syriana: “Your president rings my father and says, ‘I’ve got unemployment in Texas, Kansas, Washington State.’ One phone call later we are stealing out of our social programmes in order to buy overpriced airplanes.”
To be sure, Trump still bragged about big defence deals. The White House said the US and Saudi Arabia agreed to $142bn in arms sales. But traditional defence companies like Lockheed Martin and Raytheon are lagging in the markets this week. Now, it's chipmakers that investors are watching.
Nvidia and AMD are rallying because the Trump administration announced on Tuesday that it was ending the export restrictions that the Biden administration had slapped on AI chips.
In a twist of history, this time, the Gulf states wanted to buy America’s products but were prevented from doing so by the US, which was concerned they would leak the technology to the US's top rival, China.
The future
Saudi Arabia and the UAE are trying to become leaders in AI. They are racing to build data centres and fill them with advanced chips. Both countries lobbied the Trump administration hard in recent months to address concerns that they could be trusted with American products.
On Tuesday, Trump’s Department of Commerce said that the Biden administration’s "AI Diffusion Rule" was “misguided” and would “derail economic growth”.
Under Secretary of Commerce for Industry and Security Jeffery Kessler said the US would now “pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries”.
With government budgets in Asia and Europe stretched, few US partners have the deep pockets to buy hundreds of thousands of American-made chips like the oil-rich Gulf. And these purchases aren't giveaways to boost US employment numbers.
The Gulf states are racing to wean their economies off a reliance on oil exports.
So, the combination of the Trump administration’s regulatory decision and a slew of tech deals is powering chipmakers' shares higher.
Nvidia announced on Tuesday that it was partnering with Humain, a subsidiary of Saudi Arabia’s sovereign wealth fund, to build AI factories in Saudi Arabia “powered by several hundred thousand” of the American company's most advanced chips.
AMD announced its own deal to sell chips and software for data centres “stretching from the Kingdom of Saudi Arabia to the United States” in a $10bn project.
Both companies are hopeful that they will be able to scale up their sales rapidly because Saudi Arabia has the cheap energy to ramp up the megawatts, a measure of energy, that Data centres use, which will require even more chips.
Although the companies have sealed deals with entities linked to Saudi Arabia’s sovereign wealth fund, investors are going to be looking for the bilateral agreements that the US government needs to strike with the Saudi government about securing AI chips.
China
US defence and intelligence officials who supported the Biden administration rule did so in part out of concerns that the US technology could be transferred by Gulf states to China. The UAE and Saudi Arabia have lobbied the Trump administration hard to address those concerns.
Trump’s decision to cut the export controls reflects rising competition with China, which has developed its own AI industry and is just as eager for Gulf sovereign wealth fund cash.
According to the Australian Strategic Policy Institute, the US has been surrendering its lead in critical technologies like defence, space and energy to China.
An August 2024 report said that between 2003 and 2007, the US led in 60 of 64 technologies, but its position rapidly shrank to leading in just seven between 2019 and 2023, as China pulled ahead to lead in 57 of 64 technologies.
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