Uncle Sam Reportedly Considers Capping AI Chip Shipments To Middle East

Amid fears that Middle Eastern nations are being used to funnel AI accelerators and other sensitive technologies to China, the Biden administration is reportedly considering capping shipments of the products to certain countries in the region.

That's according to a Bloomberg report citing unnamed sources familiar with the matter, who told the publication that the idea has gained traction among officials in recent weeks.

Government agencies haven't formalized a plan – they're just reportedly discussing it.

The Register asked the Commerce Department for comment, and we'll let you know if we hear anything back.

Exports of accelerators are already restricted – and have been since 2023 – on grounds that firms in Middle Eastern nations may be reselling certain kit to Chinese entities, circumventing trade restrictions.

Sales to Middle Eastern nations are not banned outright, but require the suppliers of AI hardware to obtain special licenses. Nvidia, for instance, recently reached an agreement to furnish the Qatari telecom Ooredoo with thousands of GPUs. Saudi oil giant Aramco announced it was also building an AI supercomputer powered by Nvidia GPUs.

However, the Biden administration could make it much harder to obtain these licenses by capping the number granted to certain countries. This could spell trouble for Saudi Arabia and the United Arab Emirates (UAE), which have sought to establish themselves as hotbeds for AI development and rely heavily on American-made chips to fuel their ambitions.

Caught between Biden and Beijing, some entities – like the UAE – have been forced to cut ties with their Chinese partners simply to avoid scrutiny. Earlier this year UAE-based AI developer G42 said it would end its relationship with Chinese manufacturing giant Huawei in hopes of assuaging concerns raised by US intelligence agencies that it might be secretly funnelling AI advanced technologies and genetic data to the Middle Kingdom.

While imports of American accelerators to Middle Eastern countries remain limited, access to compute isn't nearly as difficult. In fact, G42 is currently in the process of funding some $900 million worth of wafer-scale supercomputers from AI chipmaker Cerebras to remotely train and run various AI models via the chip startup's cloud.

Meanwhile, Microsoft is investing $1.5 billion into G42 to accelerate the development of AI technologies in its own cloud – a deal that very quickly drew the scrutiny of US officials.

And it's not just Cerebras or Microsoft taking advantage of the dubious geopolitical climate to grow business. In September, US chip designer turned inference-as-a-service provider Groq announced a strategic partnership with Aramco to build an AI datacenter. We'll note that, in this case, Groq's LPU – which is built on GlobalFoundries' 14nm process – likely falls outside of US trade restrictions.

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ASML plummets

Speaking of another highly restricted technology, ASML, which produces some of the most sophisticated photolithography tools used in the manufacture of high-tech semiconductors, saw its share price plunge on Tuesday in response to a lackluster forecast.

At market close, the semiconductor equipment manufacturer's share price was down 16.26 percent. Among the causes for the dive was the revelation [PDF] that US efforts to stem the flow of advanced technologies like ASML's lithography tech have had their desired effect – and seen Chinese buyers exit the market.

The semiconductor equipment maker now expects China to account for just 20 percent of its annual revenue in 2025, down from roughly 49 percent in prior years.

Over the past few years, the US has levied intense pressure on its allies, including The Netherlands, to restrict the sale of ASML's most sophisticated chipmaking equipment to China. The rules were initially limited to extreme ultraviolet lithography (EUV) kits, but later extended to older deep ultraviolet litho machines (DUV).

The US has also been successful in pressuring ASML to stop servicing many of its Chinese customers. Between export restrictions and the service ban, it shouldn't come as a surprise that ASML sales in the region would evaporate.

The fact that ASML enjoyed something of a sales bonanza as Chinese chipmakers stocked up on its equipment before the restrictions went into effect probably doesn't make for a flattering comparison nearly a year later.

ASML also blamed a "significant reduction in Low NA EUV tools" – those with a small numerical aperture and therefore lower resolution – for its revised sales forecast.

"While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness," ASML CEO Christophe Fouquet warned in a prepared statement.

The Dutch tech giant expects to see 2025 net sales in the range of €30 billion to €35 billion ($32–38 billion). ®