GenAI in Saudi Arabia and UAE is rising.

The technology landscape is quickly evolving, and the cost of entry is rising just as rapidly. In this environment, understanding the full Generative AI landscape will be critical. 

Generative AI (GenAI) is transforming industries and reshaping global dynamics, becoming a critical factor in innovation and geopolitics. As “GenAI superpowers” like the US and China dominate, businesses must adapt to navigate shifting regulations and competition. This article explores how organizations can thrive in this evolving landscape.

We see that the US and China are currently at pace with controlling the supply of Generative AI. But while all eyes are on the US-China rivalry, something is happening in parallel. A small group of countries—the “middle powers”—is emerging. Each of them has its own distinct strengths that may enable it to compete on a regional and even global scale as a supplier of the technology.

“Two Superpowers” Narrative

The superpowers in GenAI are the US and China, and these two countries control sizeable portions of the whole GenAI value chain. Just to show what we mean by superpower, we’re going to give some details about the US and China’s GenAI ecosystems.

Nearly 70% of the world’s outstanding AI models have been developed by or in partnership with US-based companies or academic institutions since 1950. US-based GenAI startups have received a total of $65 billion in investment since 2019. In addition, giant firms like Alphabet, Amazon, Meta, and Microsoft are expected to exceed $200 billion in their capital expenditures for AI technologies.

Two Chinese companies, Alibaba and the GenAI startup 01.AI, contribute over one-quarter of the world’s top open-source models. China filed more than 76,000 AI patents with the World Intellectual Property Organization between 2019 and 2023. This number is about four times as many as the US.

China also has ample data center infrastructure. And its public R&D budget has averaged $50 billion/per annum between 2016 and 2023. Government VCs have invested nearly a quarter of their total funds in AI firms. This means more than $180 billion in total since 2000.

Middle Powers in Generative AI

There is momentum in other parts of the world. The European Union, Saudi Arabia, the United Arab Emirates, South Korea, and Japan are the powers on the rise in this sector.

The EU has a combined GDP OF $18 trillion and this advantage makes it a massive market.  The EU has an extensive and growing pool of AI specialists. While European AI companies are modest in size and funding compared to their US and Chinese counterparts, they have a strong foundation of talent. Compared with the US, GenAI startups in the EU have only received $3.5 billion in investments since 2019. 

But the challenge is to balance innovation with safety where regulation takes much longer to catch up with actual innovation. The EU is grappling with regulation as artificial intelligence becomes a cornerstone of economic and social development. We often hear that “the US Invents and the EU Regulates” In fact, its regulations such as the General Data Protection Regulation (GDPR) and the EU AI Act will create demand for EU-developed and -hosted intelligence. This way may be viewed as more trustworthy and protective of European user data.

South Korea and Japan have capabilities across critical GenAI enablers but lack scale. For these two countries investing to achieve this scale can create greater competitiveness. South Korea and Japan also have sizeable capital pools to provide the investment required for the technology.

The annual R&D spending of South Korea and Japan’s tech companies is greater than that of other GenAI middle powers. South Korea spent $28 while Japan spent $26 billion. South Korea and Japan have ranked first and third among GenAI middle powers in AI patents since 2013. Ease of access to the chip is another key enabler. In this context, South Korea and Japan also benefit from their important positions along the hardware value chain.

GenAI in Saudi Arabia and UAE

GenAI in Saudi Arabia and UAE is rising. Saudi Arabia and the UAE are positioning themselves as regional leaders in generative AI (GenAI), leveraging their strategic investments, regulatory agility, and tech-driven ambitions to attract global players. Saudi Arabia and the UAE have abundant land, straightforward approval procedures, pools of capital, and exceptionally low-cost renewables. These factors make these two countries an excellent place to build electricity-gobbling data centers that use AI’s thinking. UAE and Saudi Arabia, have been aggressively investing in advanced AI capabilities.

While Saudi Arabia focuses on integrating AI into its Vision 2030 transformation goals, the UAE emphasizes flexibility and public-private partnerships to foster innovation. Both countries aim to capitalize on AI’s potential to transform industries and strengthen their global influence.

GenAI in the UAE

The UAE has adopted a flexible and agile regulatory framework to establish itself as a global hub for artificial intelligence (AI). By emphasizing a pro-business approach, the country aims to foster rapid innovation and position itself at the forefront of AI advancements. Its policies focus on encouraging public-private partnerships and facilitating the swift deployment of cutting-edge technologies. Instead of enacting a singular, overarching AI law, the UAE employs a “patchwork of decrees and guidelines” developed over time, reflecting its commitment to becoming a leader in the AI space. This strategy enables the UAE to adapt quickly to technological advancements while creating an environment conducive to innovation, according to a report by law firm White & Case.

In the free zones, no specific AI regulations have been introduced, but updates to existing laws, such as data protection rules, have been implemented to address the evolving challenges brought by AI. This approach seeks to balance innovation with risk mitigation by relying on industry-led guidelines rather than broad regulatory measures. By prioritizing flexibility and collaboration, the UAE positions itself as a dynamic center for technological progress while ensuring that ethical and security considerations are addressed through tailored adjustments to its regulatory landscape.

GenAI in Saudi Arabia 

Saudi Arabia is channeling unprecedented funds into AI, with plans to invest $40 billion in AI development and an additional $100 billion in data center expansion under Project Transcendence. The Kingdom’s earlier $100 billion tech fund (Project Alat) underscores its commitment to becoming a GenAI leader. These investments are part of a broader strategy to diversify its economy in line with Vision 2030.

Saudi Arabia is making strides in Arabic-language AI. Aramco developed the world’s largest industrial GenAI model, while the Saudi Data and AI Authority released ALLaM, a leading Arabic large language model (LLM) family. These advancements demonstrate Saudi Arabia’s focus on leveraging its linguistic and cultural strengths in the AI domain.

Despite notable growth in its AI talent pool—up 17% since 2022—Saudi Arabia’s 5,000 AI specialists are still far fewer than in Western nations like Germany. Additionally, the Kingdom needs to expand its technology export markets to sustain the high costs of GenAI model development and secure long-term profitability.

This article is based on data and insights from Boston Consulting Group’s (BCG) research. The report highlights how generative AI is transforming industries globally and becoming a pivotal factor in geopolitics, requiring governments and businesses to stay agile and adapt to rapidly evolving dynamics.