As one door closes, another one opens in the AI chip market.
One month after the Trump administration effectively barred U.S. chipmakers from selling artificial intelligence processors to China, Saudi Arabia has emerged as a major new customer. AI stocks, led by Nvidia, surged on the news.
On Tuesday, Nvidia and Advanced Micro Devices separately announced deals to provide AI chips to Humain, a new AI subsidiary of Saudi Arabia's Public Investment Fund. Humain plans to purchase hundreds of thousands of advanced processors for AI data centers with a projected capacity of up to 500 megawatts over the next five years.
Nvidia stock rose 5.6% Tuesday and AMD stock climbed 4%.
On the stock market today, Nvidia stock advanced 4.2% to close at 135.34. AMD stock increased 4.7% to 117.72.
In other news, AMD on Tuesday announced a new $6 billion share buyback program, boosting its total repurchase authority to about $10 billion.
Among other AI stocks, Super Micro Computer also got a lift from Saudi business.
Late Tuesday, Supermicro and DataVolt, a Saudi Arabian data center company, signed a multiyear partnership to deliver systems for DataVolt's hyperscale AI campuses in Saudi Arabia and the U.S. The deal is valued at more than $20 billion.
Supermicro stock surged 15.7% to 45 on Wednesday. On Tuesday, Supermicro shares jumped 16%.
Saudi Deals To Offset Loss Of China Sales
The Saudi AI projects could be worth $3 billion to $5 billion in annual chip sales and $15 billion to $20 billion in total spending over a multiyear period, BofA Securities analyst Vivek Arya said in a client note Tuesday.
"Sovereign AI nicely complements commercial cloud investments with a focus on training and inference of LLMs (large language models) in local culture, language and needs, and could be 10%-15% or $50 billion-plus annually in the longer-term $450-$500 billion global AI infrastructure opportunity," Arya said.
He added, "Sovereign AI could also help address limited power availability for data centers in U.S., plus offset headwinds from restrictions on U.S. companies shipping to China."
Other AI Stocks To Benefit
While Nvidia and AMD are the main beneficiaries of the Saudi AI ventures, other companies in the AI ecosystem will benefit as well, Arya said. That includes AI stocks Broadcom, Coherent and Marvell Technology, he said.
Arya kept his buy ratings on Nvidia and AMD shares. He upped his price target on Nvidia stock to 160 from 150. He increased his price target on AMD stock to 130 from 120.
Meanwhile, the Trump administration is weighing a deal that would allow the United Arab Emirates to import more than 1 million advanced Nvidia chips, Bloomberg reported. That quantity far exceeds limits under Biden-era AI chip regulations.
The deal would let the UAE import 500,000 chips per year from now to 2027, with one-fifth set aside for the Abu Dhabi AI firm G42. The rest would go to U.S. companies building data centers in the Gulf nation, including OpenAI, Bloomberg said.
The AI spending news out of the Middle East is "a bullish eye-opener for investors in U.S. tech stocks," Wedbush Securities analyst Daniel Ives said in a client note Wednesday. "It's becoming crystal clear the AI revolution has found its next major area of penetration … Saudi Arabia."
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