U.S. Defense and AI Companies Poised to Dominate Middle East Spending Wave

President Donald Trump’s first overseas trip since returning to the White House turned a lot of heads across the aerospace & defense and semiconductor industries last week. Over the course of just a few days, he visited three key Persian Gulf states—Saudi Arabia, Qatar and the United Arab Emirates (UAE)—where a cascade of economic agreements potentially totaling in the trillions of dollars was unveiled.

One of the marquee announcements was a $142 billion arms deal, part of a broader $600 billion commercial package between the U.S. and Saudi Arabia. Touted by the White House as the “largest defense sales agreement in history,” the deal includes “state-of-the-art warfighting equipment” and services from more than a dozen American defense companies, though none are named.

Saudi Arabia is already the largest U.S. foreign military sales (FMS) customer, with nearly 80% of its defense acquisitions coming from American companies. According to the Stockholm International Peace Research Institute (SIPRI), Saudi Arabia spent more than $80 billion on defense in 2024, making it the seventh-largest military spender in the world and by far the largest in the Middle East.

The Saudis aren’t alone. The UAE and Qatar have also made substantial defense purchases in recent months, including advanced drones, helicopters and counter-drone systems. As geopolitical uncertainty grows, Gulf nations are doubling down on deterrence, and they’re looking to the U.S. for the tools to do it.

Betting Big on AI Infrastructure and American Semiconductors

One of the more striking takeaways from the trip might be the emergence of AI and semiconductors as critical assets in the defense toolkit.

In Saudi Arabia, a new state-backed initiative called HUMAIN is leading a multibillion-dollar push to build an “AI Zone,” in partnership with Amazon Web Services (AWS). The project, which will feature dedicated server farms powered by American semiconductors, is part of a broader effort to localize advanced tech manufacturing and training within the Kingdom.

NVIDIA, the world’s leading AI chipmaker, is expected to provide HUMAIN with at least 18,000 of its GB300 Grace Blackwell processors. Over the next five years, that number could reach several hundred thousand chips. Meanwhile, the UAE is negotiating for more than a million NVIDIA chips, enough to radically boost its own AI infrastructure.

Saudi Arabia’s AI investments alone could generate $3 to $5 billion in annual chip sales, with longer-term infrastructure spending estimated at $15 to $20 billion, according to Bank of America analyst Vivek Arya. That would make sovereign AI one of the fastest-growing areas in the broader $450 billion AI infrastructure market.

Aviation Remains a Strategic Pillar

Aviation shouldn’t be overlooked. In Qatar, Boeing signed its largest-ever widebody aircraft deal, a $96 billion order with Qatar Airways for up to 210 American-made jets. Powered by GE Aerospace engines, the order includes both the 787 Dreamliner and 777X platforms.

This deal alone underscores the continued strategic value of aerospace as a core pillar of both economic and national security policy. Commercial aircraft deals often include co-production agreements, pilot training and maintenance support—capabilities that enhance soft power while reinforcing the industrial base.

Global Military Spending on a Relentless Uptrend

All of this comes against a backdrop of surging global military budgets. World defense spending hit a record $2.7 trillion in 2024, a 9.4% year-over-year increase and the sharpest rise since at least 1988, according to SIPRI. Spending has risen for 10 consecutive years, with gains across all five global regions.

Meanwhile, NATO is moving toward a new target of 5% of GDP for defense spending, up from the longstanding 2% benchmark. Both Germany and the U.S. have endorsed the increase, and the final plan is expected to be unveiled at the NATO summit this June.

The world isn’t de-escalating. It’s rearming, with greater urgency, more advanced tools and higher price tags.

I see these trends as a growing opportunity across multiple sectors—defense contractors, semiconductor makers, AI infrastructure providers and aerospace manufacturers. While individual names and strategies must be evaluated with care, the broader momentum is unmistakable.

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (03/31/2025): Amazon.com Inc., NVIDIA Corp., The Boeing Co.

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Originally Posted on May 19, 2025 – U.S. Defense and AI Companies Poised to Dominate Middle East Spending Wave