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- [00:00]
Susan Ettlinger
The PC gave us computing power at home. The Internet connected us. And mobile let us do it pretty much anywhere. Now, generative AI lets us communicate with technology in our own language, using our own senses. But figuring it all out when you're living through it is a totally different story. Welcome to Leading the Shift, a new podcast from Microsoft Azure. I'm your host, Susan Ettlinger. In each episode, leaders will share what they're learning to help you navigate all this change with confidence. Please join us, listen and subscribe wherever you get your podcasts.
- [00:34]
Stephen Overlea
Hey, welcome back to Politico Tech. I'm your host, Stephen Overlea. President Donald Trump landed in Saudi Arabia on Tuesday, and his first order of business was a big lunch with business leaders. That part wasn't surprising. What caught my eye was the guest list. Top executives from OpenAI, IBM, Uber, Google, Amazon, Nvidia, Palantir, basically a very long list of American tech companies all flocking to Riyadh to announce splashy business deals worth some $600 billion. Now, Mohamed Salman tells me this is the new Middle east, where the relationship with the US Is driven by tech and innovation, not just oil and security, and that the most valuable commodities today are data, microchips, and the energy needed to power artificial intelligence. Mohamed is a senior fellow at the Middle East Institute in Washington, D.C. he's been tracking this evolving economic relationship for years. And on the show today, I called him up to find out what tech companies and Gulf nations have to gain and potentially lose from this new arrangement. Here's our conversation. Well, Mohammad, welcome to Politico Tech.
- [02:06]
Mohamed Salman
Thank you, Steven. Thank you for having me.
- [02:08]
Stephen Overlea
I'm curious what your reaction was when you saw the guest list for Trump's visit to Saudi Arabia and the long list of tech executives who joined him there. What did you think?
- [02:18]
Mohamed Salman
I was not surprised. And the reason why I was not surprised, the relationship, I would say since the mid 2010s have been pivoting radically towards AI and tech. So if you are following the Gulf closely, you will see that Sam Altamiran is in the uae, that there is a strong relationship between the Gulf countries and many of these CEOs. When Sheikh Tahmun bin Zayed, the national security adviser of the UE, was in great Washington, D.C. a few weeks ago, he met with the same CEOs, Nvidia, Microsoft, BlackRock, Elon Musk. So clearly the relationship has changed. And it became very much about compute, not crude. And this is why people were surprised. I think people also were surprised by the heft and how AI became the central piece of their relationship. But this has been long coming.
- [03:09]
Stephen Overlea
I'm curious to hear more about that and what exactly has changed? Because to me, the optics were a little bit striking, just because it seems like it wasn't that long ago that some of these companies were kind of running the other direction here, Right? They were, like, worried about human rights issues, they were worried about climate change. I mean, what is the change here? Why is this really taking root, this new relationship?
- [03:31]
Mohamed Salman
Let me say this. If you are an AI leader today, if you are an executive for a tech company and you are thinking about the question of AI and capabilities, you have to figure out what are the triangle of compute, which is ships, data centers, and energy. And clearly we have so much demand for compute. Compute is the centerpiece for AI. This is what fuels AI ecosystem. But I don't think we have enough supply for compute. So you have a natural, organic thinking about, okay, wait a minute, how can we solve that question of compute supply? Right. We in the United States, almost 3% of our own electricity grid, are going towards data centers. But even with that, just for us to keep up with this level of high compute demand, we need to put huge investment in building the energy infrastructure for that. And then if you're taking this one notch on top of that, what is the region that can give us or have that sort of compute triangle? Clearly, this region is the Gulf, because they do have access to energy, low cost, abundant energy. They have massive capital investment that they're directing towards hyperscale AI infrastructure. And three, they have access to ships. So you have that region that's emerging as what I call like a third theater between the United States and China. But if you accept the premise that energy today is the main bottleneck for compute power, in your mind as an AI leader, okay, that means that the Gulf is going to be your next destination as an AI partner.
- [05:10]
Stephen Overlea
I think that's so fascinating that the Gulf is kind of emerging as a place where those three, as you said, vital aspects of AI come together. And I know you wrote before Trump's trip that, quote, a partnership focused on innovation and shared technological advancement can redefine US Saudi relations for the digital age. I'm curious, does that partnership that you had in mind look like all of these investments and these business deals that we heard about and heard announced this.
- [05:40]
Mohamed Salman
Week, when we're thinking and talking about the US Saudi relationship and the broader US Gulf relationship? Pretty much most of its own history? It's about energy for security framework, right? That's it. You're only thinking about Saudi Arabia and the rest of the Gulf as a swing energy supplier. And that has been pretty much the relationship until a point where two things happen around the same time. One is the digital age, the digital era that we're facing. We're speaking about the introduction of AI to the global economy that I would say gradually started to emerge in the past 10 years and of course exploded in the past two to three years. In the same time, new young leaders in the Gulf who understand very well that for them to make their countries sovereign, strong and very viable for the 21st century, they need to pivot from energy dependent economies to be very much focused on AI as the centerpiece of a statecraft and economy in the 21st century. And those two factors merged together and that clearly impacted the discourse of the relationship with the United States that we no longer have Oil executives being the central piece of the investment partnership that's very core to the United States and the Gulf countries. It's the tech executives who are looking for three things from the few items from the Gulf. 1. Investment. If you are Sam Altman, you are of course looking for investors in building this massive infrastructure for OpenAI. And no surprise, MGX UE MGX, which is an AI investment company, is part of the Stargate project that includes Open OpenAI, Oracle and SoftBank. If you are Nvidia, you are looking for a customer because Nvidia has to make profits so they can take that profit and put an R and D to be able to compete and the same time not to cede market share to Chinese alternatives. And then of course, if you are a company that's looking for a trusted partner to scale up your own services for Global south, like the partnership between Microsoft and G42, that makes more sense. So this is why the Gulf has started to play that role. There's a reason why those AI executives are looking into the Gulf as partners and as co investors. And this is the new discourse of relationship. I know that this is a very long answer, but I tried to walk you through the logic of how this somehow happened.
- [08:08]
Stephen Overlea
Well, I want to dig a little bit deeper into that because I'll be honest, anytime I hear that there's a win win relationship, I get a little bit scared. Skeptical, right, Because I feel like there has to always be some sort of downside. So let's look at what each of these sides gets out of this. And if we start with the tech industry, I mean you mentioned for instance, investment, obviously there is a lot of wealth in the Gulf and Saudi Arabia in particular, these are also the richest companies on the planet. You know, they have a lot of their own money, they can go a lot of places to get money. What about the Gulf in is really appealing and allows them to overlook potential downsides of these investments.
- [08:48]
Mohamed Salman
Actually, let me examine the premise of the question of money. Actually, I don't think that many places have money. I think just talking to many people around the world in different capitals. I work on a global level and I travel in Asia and South Asia, Japan and Europe. Actually not so many regions have capital to invest in that sort of level. I don't think this is the case. I think sovereign wealth funds in the Gulf emerged especially in this weird economic cycle that we have been witnessing since COVID until today. I think sovereign wealth funds in the Gulf have been one of the few engines for capital investments. I do not want to discount that. Capital is extremely important factor. We're speaking about trillions of dollars coming from countries that have a small population and, and they have to invest their money and the United States is a very important place and a destination for their investment is not the highest level of return on their investment, but it's the most secure level of returns. So the question of capt is extremely important. The second thing is the question of energy that I cannot discount. The question of energy is extremely important. This is one of the few regions that have this massive, abundant, low cost energy and the infrastructure around energy. Because I do not want people to assume that just having oil means that you have the energy to fool an infrastructure. Oil is a piece of it. And actually I would even argue right now you're seeing a trend in the Gulf that they are bringing nuclear into the energy mix. But back to the original point, it's not only having the oil, it's having the energy infrastructure to fuel these data centers. And that the very idea that there is spending on these data centers which cost billions and billions of dollars in capex. So I would all these factors make the region very lucrative for AI partnership with all these tech executives.
- [10:43]
Stephen Overlea
You know the technologies that we're talking about here though, artificial intelligence, microchips, they have been deemed sensitive by the US and there were trade restrictions put in place until Trump rolled some of those back just recently. What are the risks then for the US and for American tech companies getting into business with Saudis getting into business in the region.
- [11:05]
Mohamed Salman
So on the question of export control, there are two schools of thought here and I have been between both for quite some time. The first school of thought is Compute is a resource that we have to restrict and make sure we selectively choose who has access to compute. And compute, as I define, is a triangle. The energy ships, data centers, and we control the ship bottleneck in that sort of triangle. There's another school of thought that says you guys, in the first school of thought, you assume that ships are bottleneck. You assume that expo control alone are going to define the AI race. You assume that only expo control limitations, those countries would not get the chips. I started to become much more like identify with the second school of thought. Meaning, yes, we have the best ships today. That's true, that's factual. Are we going to have the same, like the same level of fleet on ships in three, four or five years? I actually don't know. Okay, so if we are going to close all these markets, we're going to restrict compute, we're not going to send all these ships. Right. You assume that those Gulf countries are not going to access ships from everywhere else.
- [12:22]
Stephen Overlea
Right.
- [12:22]
Mohamed Salman
I mean, if you have that level of capital, if you have that level of AI infrastructure that you're building, you have the energy, you're going to get.
- [12:28]
Stephen Overlea
Chips, you're going to go somewhere, you're.
- [12:30]
Mohamed Salman
Going to go elsewhere to get it. Not the same efficiency, not the same level of productivity, absolutely, I agree with that. But they're going to get there as well. And another thing, in my point of view, as someone who is an engineer in my twenties, I believe that the bottleneck for compute is not ships. The bottleneck for compute is going to be energy. And compute is going to be a functionality, direct functionality of who has the energy to fool these sort of AI backend systems. Hi, I'm Jack Blanchard, Playbook's managing editor and author. And I'm Dasha Burns, Politico White House Bureau Chief and Chief Plan Playbook Correspondent.
- [13:18]
Susan Ettlinger
And we are the new hosts of the Playbook podcast.
- [13:22]
Mohamed Salman
Every morning, Dasha and I dig into the top story of the day and give you some analysis and insight into what's really going on in D.C. and the world. So join us every weekday morning. Listen to the Playbook podcast wherever you get your podcasts.
- [13:40]
Stephen Overlea
I guess one of the risks I'm interested in too is like the, the mismatch potentially between, you know, the democratic values, if you will. Right. Sort of freedom of expression and human rights and some of these qualities that the US and tech companies have traditionally looked for in tech partners. I don't know that Saudi Arabia checks those, those boxes. And so is there a risk there to deepening Involvement around sensitive technologies with a government that just functions very differently.
- [14:13]
Mohamed Salman
I mean, here's the thing. I mean my argument is that it's actually not really sensitive. My argument is compute is in itself a commodity. I don't believe that compute itself is something that's going to be guarded. I don't subscribe to the idea that compute or ships are deemed sensitive as if they are F35 assets. I even argue if we are selling this level of high trusted American military platforms to the Gulf and if these countries host thousands of American troops and we have security arrangements, I'm not going to call it commitment, but security arrangement, then the question of compute becomes way easier to answer. If it's going to be only a commodity and we are one of the sellers to this sort of commodity. I don't understand the argument around we should just exclude the Gulf for these traditional reasons.
- [15:09]
Stephen Overlea
As for kind of what Saudi Arabia gets from this, it was so interesting to be hearing you talk about kind of the young leaders in the Gulf and their ambitions around pivoting those economies right from being totally dependent on oil to being big drivers of AI and technology. How grand are their ambitions?
- [15:29]
Mohamed Salman
Oh boy, grand. I lived in Saudi Arabia for two years and I used to commute between the Saudi city of Jeddah and Washington D.C. and whenever I come back from Saudi to Washington and tell my colleagues about what I see, they will not really believe me. I think like what ambitions around gaming, around cloud regions, around data center buildups. And when you go to the UAE and see this super active, highly energized nation with massive talent, local talent, working on building innovation hubs and shib designing programs for school students. I mean, to your question, their ambitions are really massive. I would say the sky is the limit is the the title of the game there.
- [16:27]
Stephen Overlea
And can they achieve those ambitions without US Tech and without US tech companies? I guess. How central are the companies that we saw in Saudi Arabia this week to leaders? They are achieving that ambition that they have.
- [16:44]
Mohamed Salman
I think it's a question of time, not a question of if. Meaning okay, in abstract form, can the Gulf countries with this level of capital and energy infrastructure be leaders in AI? Just this statement, yes, they are going to be leaders in AI. Will their work with the United States make this journey easier, faster? Yes or no? Absolutely yes. You work with all these American tech companies because those are the best and the best tech companies that exist today. And they're going to make the Gulf diversification efforts pivot AI faster, much more streamlined. And on top of all of that aligned with the United States AI stack. Right. So there are two things happening, right, that they have all the fundamentals to become AI leaders. And then the question is, are you going to do this with us or they're going to go look for other alternatives that doesn't really come with any sort of strings attached.
- [17:45]
Stephen Overlea
Got it. So there's a competition then for the US is what you're saying?
- [17:49]
Mohamed Salman
I think the visit and these sort of Riyadh accords that we have seen is as much about the US Gulf relationship as much as it's about also the question of China and China building its own global AI stack. And we're seeing this clearly in Southeast Asia. And the United States doesn't want to replicate the Southeast Asia model in the Gulf, given the security relationship and given that we as a maritime nation in the United States, we care about global choke points and of course the global stability. So there are a lot of fundamentals that are different when it comes to the question of the Gulf. And we do not want to cede this region to Chinese ticketcraft. And I'm going to add final note here, we as United States have a problem. We are not able to outscale China when it comes to production of low cost, high number of technology hardware. So we also should be realistic about things that we have and things we do not have. We do not have the scale to out compete with China. They have massive scale, have massive market, they have massive R and D. They have China Inc. We do not have US Inc. They have China. This China Inc. Means very centralized way of allocating capital. They have massive market demand. They have high level of STEM graduates, a smart workforce. When you have this sort of triangle, this is a massive tech power and you should not really underestimate them. And we should not really take partners for granted when it comes to the question of China. You have to give something. And none of these things are for free. It also comes with a premium. The Gulf countries are paying a premium to be able to elevate their position in the global AI race. So we should come to understanding that if we are not really humble about the way we're thinking about the tech competition, we actually might end up with a very small number of countries that align with our own global AI stack.
- [19:47]
Stephen Overlea
Hmm. You know, I don't want to ignore the fact that this latest deal making is all happening with Trump. Trump is positioning himself as the big deal maker here. He does take credit sometimes for business deals that would have gotten done anyway. And I'm curious if you Think he has made a meaningful difference here or would this relationship be happening without him?
- [20:11]
Mohamed Salman
I think the general trend of the relationship that compute is a really big major area of cooperation. And this has been taking place under the previous administration with President Biden. It also has been taking place even with President Trump in his first term. So I would say the relationship has been going this way and is going to be a relationship that endures beyond whoever is in the White House. Of course, President Trump has, I would say, a leader to leader trusted relationship. Right. I'm not going to be here and tell you that President Biden had the same warm relationship with the Crown Prince. That's not true. Right. Clearly there is a level of warmth and trust and confidence that, that between the President Trump and those Gulf leaders. And also I have to say we also have a President that measures success in how many billions of dollars he's able to secure as commitment to the United States economy.
- [21:12]
Stephen Overlea
Right.
- [21:12]
Mohamed Salman
His, his measure of success is deals is how many billions I'm able to bring to the United States.
- [21:17]
Stephen Overlea
Absolutely.
- [21:18]
Mohamed Salman
If American companies are able to benefit in a material sense from these sort of arrangements and diplomatic understanding with those countries. So it's a bit, he's a bit different and operating a very different understanding of, of the bilateral relationship where trade and investment is really very core to the way he thinks about these things.
- [21:36]
Stephen Overlea
And so I'm curious what you think comes next. I mean, we'll obviously have several more years of President Trump developing this relationship. What is next in this kind of tech driven relationship between the US and Saudi Arabia?
- [21:50]
Mohamed Salman
I think what's next is going to be the question of ship manufacturing. I keep talking all the time about the Gulf countries have access to computer angle data centers and ships and energy. Sure, that's fantastic, great news. But I think their next phase, what they're looking for is going is going to be how to localize ship manufacturing inside the Gulf. And I think there's going to be a natural progression. I think that the fear inside the United States is not only the fear of over concentration in Taiwan, it's the very idea that the entire ship supply chain is highly concentrated in East Asia more broadly. And as the tension increases and as listen, we are in a moment in the global order where we're no longer in no peace, no war situation. Right. You're going to have a lot of inflection points taking place everywhere and we are no longer have safety net as we used to. So you're going to have a lot of voices that are going to talk and try to act on the idea that over concentration East Asia might be a problem and we need to look for another region that's a bit different that could also play a similar role. But don't get me wrong, no one is going to be able to produce that high level of high end chips. Right? But you're going to be looking for arrangements around diversifying the AI ecosystem and diversifying the ship manufacturing that you have different regions manufacturing some parts of the value chain of ships because over concentration is problematic. And I think this is where the Gulf is going to be well placed to be part of this ship manufacturing value chain.
- [23:33]
Stephen Overlea
Well, very interesting. We'll have to keep track of this and have you back on the podcast. But Mohamed, thanks for being here today.
- [23:39]
Mohamed Salman
Thank you for having me.
- [23:42]
Stephen Overlea
That's all for today's Politico Tech. If you enjoy Politico Tech, be sure to subscribe and recommend the show to a friend or colleague. And for more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Music in our show comes from the mysterious Breakmaster Cylinder. Our producer is Nirmo Malaikal. I'm Stephen Overle. See you back here next Thursday.