Trump Announces $600 Billion Investment Deal with Saudi Arabia

After a recent visit to Saudi Arabia, President Donald Trump reported that the kingdom has committed to investing $600 billion in partnerships with U.S. firms. This agreement includes $142 billion dedicated to defense sales, aimed at outfitting the country with advanced warfighting technology.

The notable beneficiaries of this deal are U.S. chip manufacturers Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD). Following the announcement, both companies disclosed agreements to supply chips to Humain, a Saudi Arabian artificial intelligence (AI) start-up backed by the public investment fund of the kingdom.

Nvidia and AMD Benefit from AI Investment

Nvidia plans to deliver several hundred thousand advanced graphics processing units (GPUs) over the next five years. These chips will support the AI data centers that Humain intends to establish in Saudi Arabia. The company will start with an initial shipment of 18,000 GB300 Grace Blackwell AI supercomputer chips, along with InfiniBand networking equipment.

Furthermore, the Saudi Data & AI Authority (SDAIA) aims to deploy up to 5,000 Blackwell GPUs, which will fuel smart city solutions. Additionally, Nvidia will assist in training thousands of developers in Saudi Arabia and will roll out the nation’s first Omniverse Cloud to simulate and test AI solutions.

Bank of America analysts have estimated that this agreement could result in total expenditures of $15 billion to $20 billion over its duration, translating to approximately $3 billion to $5 billion in annual sales for Nvidia.

Moreover, the U.S. government is reportedly close to lifting chip export restrictions on the United Arab Emirates. This arrangement would allow the import of 500,000 advanced AI chips annually through at least 2027. About 20% of these chips will go to Abu Dhabi’s AI company G42, while the remainder will be allocated to U.S. firms participating in data center projects in the UAE.

These agreements aim to offset some of Nvidia’s lost revenue due to tightened restrictions on exports to China. The Chinese market represented $17 billion of Nvidia’s revenue last year, but it has since declined to about mid-single digits of the company’s data center revenue, or around $7 billion annually based on its fiscal Q4 performance.

Meanwhile, AMD has entered a $10 billion agreement with Humain to supply chips over the next five years. This partnership will encompass a complete range of AMD’s AI compute offerings, including both GPUs and central processing units (CPUs). AMD has also signed a memorandum of understanding with SDAIA to evaluate how its chips can support future AI data centers.

In its Q1 results, AMD projected a revenue decline of $700 million in Q2 due to the new restrictions in China, with a total expected impact of $1.5 billion for the year. The Humain deal, valued at $2 billion annually, should largely mitigate this revenue loss.

Trends in AI Investment

The current agreements not only help replace lost revenue from China but may also signal a significant growth opportunity for chipmakers through government-sponsored AI investments.

Saudi Arabia and the UAE are leading the way in AI and data center investments, but they are not alone. Kuwait has allied with Microsoft to become a regional AI powerhouse. Similarly, Bahrain and Qatar are also investing in their AI infrastructures.

Outside the Middle East, India is fostering partnerships with major cloud computing firms to enhance its AI capabilities. Even smaller nations like Singapore are channeling funds into AI projects.

Simultaneously, Trump appears to be leveraging U.S. supremacy in AI semiconductors as a strategic advantage in trade negotiations. As discussions between the U.S. and China progress, there is potential for revisiting recent chip export restrictions.

Investment Outlook for Nvidia and AMD

Both Nvidia and AMD are poised to profit from growing AI infrastructure investments. Nvidia is a dominant player in the GPU market, holding more than 80% of market share. The company is likely to experience robust growth as data center expenditures rise.

On the other hand, AMD has established itself as a key supplier of CPUs for data centers and continues to carve out a niche in the GPU AI inference market. Given that inference is projected to expand significantly in comparison to AI model training, AMD is strategically positioned.

Both stocks are currently attractively valued, trading around a 30 times forward price-to-earnings ratio (P/E), and they have considerable growth potential ahead.

Data by YCharts.

Given the growth trajectories of the companies, both stocks present promising investment opportunities as they stand.

The views and opinions expressed herein are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.