The Gulf’s A.I Mirage in Jeopardy After DeepSeek Shock
The new hedge seeks to reflect the technological balance of power between the East and the West and the shortcomings of the Abraham Market promise.
After investing billions in US artificial intelligence (AI) projects to secure a non-oil economic future, Saudi Arabia, the Emirates, and the broader Gulf region have faced an unexpected shock from DeepSeek’s sudden emergence in the game. DeepSeek-R1, the Chinese AI company’s highly economical language model, has not only been touted as a strategic competitor to OpenAI’s dominant ChatGPT, but also as more advanced and culturally nuanced. This development has exposed the unnecessary extravagance of Gulf investments that have prioritised Western tech giants, and these concerns are reverberating domestically as citizens struggle under weakening economies and fragile regimes. As previously forecasted on MENAUnleashed, Saudi has heeded the warning from DeepSeek’s disruption and announced multibillion-pound investments in Chinese tech, marking a stark shift from earlier assurances that they would abandon it in favour of American investments. The move may inspire an Emirati response in kind, and, as US-China competition intensifies, a more assertive Saudi, and potentially Gulf Cooperation Council (GCC) shift eastward.
Billion-Dollar Bandages on Domestic Strife
The Gulf faces a growing myriad of challenges: unemployment, public debt, and political instability, mainly due to low oil prices and demand. In an attempt to distract from mounting domestic issues and regional risks, Gulf countries have been allocating a significant portion of their budgets and sovereign wealth funds to highly ambitious high-tech projects. Economic diversification initiatives like the UAE's Artificial Intelligence Strategy 2031, G42 Firm, and Saudi’s famous NEOM AI Hub aim to move the region away from fossil fuel dependence and secure economic prosperity as regional data hubs. However, in their hopes of gaining Washington’s favour, they have repeatedly sidelined competitors, most notably highlighted by the UAE’s swift abandonment of Chinese Huawei in favour of a $1.5 billion Microsoft investment in the Emirati AI firm G42.
DeepSeek: A Cheaper, More Arab-aligned Alternative?
The novel nature of the AI landscape almost guarantees unpredictability and shocks like DeepSeek’s, which will cause global actors to adapt to changing dynamics accordingly. As such, Saudi Arabia has responded in what appears to be a step back from the Western-oriented focus of Gulf AI investments; at the LEAP 25 tech conference, the Kingdom announced an investment in a Lenovo-ALAT collaboration, the opening of Lenovo’s Middle East headquarters in Riyadh, the launch of a collaborative Alibaba Cloud programme, and the opening of a DeepSeek centre.
The history-making Chinese AI company has integrated important features into its language learning model that Saudi Arabia and the UAE have been heavily invested in, namely the development of Arabic Large Language Models (LLMs). DeepSeek has been reported to have more advanced non-English language features, in Arabic and other languages, that offer cultural awareness in responses and localised dialects. Moreover, criticism alleging censorship tendencies regarding certain sensitive political issues may appeal to highly censored Gulf monarchies, not only providing language compatibility but also political alignment conducive to the much-needed regime stability in the region.
That said, Riyadh has not ceased investments in Western ventures, as LEAP 25 also saw investments in a Google Cloud AI hub, among others. Saudi Arabia has merely diversified its portfolio as a precautionary measure, a move likely to inspire a similar show of pragmatism by the Emirates.
US-China Competition vis-à-vis Impending Regional War
Should the Saudi-DeepSeek relationship and similar partnerships bear fruit, we could see a more economically China-aligned Kingdom, potentially culminating in full Saudi membership in BRICS, where it is currently an observer. Moreover, as US-China competition continues to intensify in parallel with existential geopolitical threats to the region, a more technologically diversified Saudi could become more politically assertive, namely in opposition to US brazenness. We may witness a consequent shift eastward within the GCC, which could take the form of a GCC-China Free Trade Agreement (FTA), as the two have agreed to ‘speed up’ negotiations in 2025.