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The seismic shift in global technology markets carries a message the region already seems to understand. When DeepSeek demonstrated that it could build cutting-edge AI models for just $5.6 million using older hardware, it did not just blow a hole in Nvidia’s stock price — it validated the Gulf’s distinctive path to technological leadership.
Let me explain why investments like the $100 billion AI initiative of Saudi Arabia’s Public Investment Fund might be more prescient than people realize.
The conventional wisdom about AI has always hinged on scale — like a skyscraper reaching ever higher into the clouds, each level demanding more investment, more power, more computing resources. But DeepSeek’s breakthrough reveals a different architectural possibility entirely: AI development is more akin to a suspension bridge, where elegance of design trumps sheer mass of materials.
This paradigm shift mirrors the Gulf’s transformation of its financial sector. Just as Dubai and Abu Dhabi upended traditional notions of wealth management — proving that Wall Street was not the only path to sophisticated investment strategies — the region now stands poised to reimagine AI development. The same strategic thinking that turned hydrocarbon wealth into world-class sovereign wealth funds could now reshape the future of AI.
The whispered conversations in Davos’ hushed hotel lounges tell the same story: The era of computational brute force is ending. Success in AI no longer depends on who can build the biggest data centers or deploy the most powerful chips. Instead, victory will go to those who can execute most skilfully, who can find the smart solution hiding in plain sight.
Here is what is really happening: The Gulf states’ traditional strengths — political stability, capital efficiency and regulatory agility — are suddenly looking like decisive advantages in the AI race. While Western nations grapple with complex AI regulation and China faces export controls, the region can chart a middle path — maintaining high standards while moving quickly to implement new technologies.
Think about how this mirrors patterns in the region’s history. Just as Dubai transformed itself into a global business hub — not by competing head-on with established centers, but by creating unique advantages through regulatory innovation and strategic positioning — Saudi Arabia now has the opportunity to do the same with AI.
The Gulf states’ traditional strengths — political stability, capital efficiency and regulatory agility — are suddenly looking like decisive advantages in the AI race.
Adrian Monck
Consider this: While Silicon Valley was building AI models that required the equivalent of a small country’s power grid to run, DeepSeek proved you could achieve similar results with clever engineering and elegant execution. It is as if someone just proved you could build a Formula 1 car using last year’s parts and still make the podium.
The implications for Saudi Arabia’s strategy are profound. Its $100 billion initiative is not simply replicating Silicon Valley’s infrastructure-heavy model — it is creating innovation ecosystems, where computational efficiency matters more than raw power. It is exactly what South Korea did with semiconductors in the 1990s, focusing on clever design rather than industrial-scale manufacturing.
Three key priorities emerge. First, leverage regulatory flexibility to create AI development zones that attract global talent while maintaining high ethical standards. Success with economic cities provides a proven model.
Second, educate to innovate. In Abu Dhabi they are building the “Stanford of the Middle East,” positioning for global AI research leadership. The Gulf’s traditional role as a bridge between East and West takes on new significance in the AI education age.
Third, think ecosystem, not infrastructure. The most valuable part of AI investment will not be the hardware you buy — it will be the innovation networks you create.
The market’s dramatic reaction to DeepSeek’s breakthrough reveals another advantage: timing. As the industry shifts from a focus on scale to a focus on efficiency, the region can leapfrog the massive sunk costs of earlier infrastructure investments.
We are entering the “Age of AI Arbitrage,” where clever implementation beats computational might. It is a world of quantum innovation where technological advantage can materialize anywhere through sophisticated thinking rather than massive investment.
Sometimes the most important revolutions are not about new capabilities, but about fundamentally new ways of thinking about old problems. The Gulf states have already proven they can transform natural resources into lasting economic advantage. Now they have the chance to do it again — this time with artificial intelligence.
• Adrian Monck writes a weekly newsletter, Seven Things. He is senior adviser to the Mohamed bin Zayed University of Artificial Intelligence and a former managing director of WEF.