*

UAE positioning itself as a global AI player

*

Trump administration could ease chip export rules

*

UAE balances strategic US ally with trading partner China

By Federico Maccioni and Manya Saini

DUBAI, May 15 (Reuters) - The United Arab Emirates is

expected to secure a deal giving it expanded access to advanced

artificial intelligence chips from the United States, after

previously facing restrictions over Washington's concerns that

China could get its hands on the technology.

Such a long-coveted deal, expected to be finalised while

U.S. President Donald Trump is in Abu Dhabi on Thursday, would

be a major win for the UAE, which has been trying to balance its

relations with its longtime ally the U.S. and its largest

trading partner China.

The UAE, a major oil producer, has been spending billions of

dollars in a push to become a global AI player. But its ties to

China had limited access to U.S. chips under former President

Joe Biden.

A source with knowledge of the matter told Reuters that the

UAE and U.S. had finalised a technology framework agreement and

that it would require commitments on both sides to the security

of the technology.

The U.S. pursued protectionist policies for years to curb

China's access to advanced semiconductors, including ensuring

the chips do not end up in the country via third parties.

Regulations appear to be easing under Trump, whose AI czar

David Sacks said in Riyadh on Tuesday that the Biden

administration's export controls were "never intended to capture

friends, allies, strategic partners".

Granting the UAE more access to the most advanced chips,

manufactured by firms like Nvidia ( NVDA ), would be a major

turnaround.

"This shift enables (the UAE) to deepen its technology

partnership with the U.S. while still preserving trade ties with

China," said Mohammed Soliman, senior fellow at the Middle East

Institute.

"It doesn't mean abandoning China but it does mean

recalibrating tech strategy to align with U.S. standards and

protocols where it matters most: compute, cloud, and chip supply

chains," he said.

The vast bulk of AI computing power is currently deployed in

the United States and China. If all the deals proposed during

Trump's tour of the Gulf states this week, in the UAE in

particular, materialise, the region could become a third power

centre in the AI race.

AI was top of the agenda when UAE President Sheikh Mohamed

bin Zayed Al Nahyan visited Washington in December in the final

days of Joe Biden's presidency. G42 and MGX, the state-linked

vehicles picked to drive the UAE's AI investment push, have also

invested in U.S. firms such as OpenAI and Elon Musk's xAI, while

Microsoft ( MSFT ) last year agreed to invest $1.5 billion in G42.

The two companies said the deal was backed by security

assurances, and under U.S. pressure, G42 had previously began

ripping out Chinese hardware it was using and sold off Chinese

investments.

Still, major Chinese firms like Huawei and Alibaba Cloud are

present in the UAE, and organised AI chip smuggling to China was

tracked out of countries including Malaysia, Singapore and the

UAE, a source told Reuters in February.

The Trump administration has said it will scrap the export

controls, adding that blanket restrictions may backfire by

pushing allies and emerging markets towards Chinese suppliers.

It has said a more open approach could boost innovation and U.S.

strategic interests.

"Trump administration officials have consistently derided

the Biden government's AI chip rules as excessively

complicated," Russ Mould, investment director at AJ Bell, said.

The previous controls divided the world into three tiers -

giving unlimited access to some countries, limited access to

middle-tier ones such as Gulf states and blocking access to

"countries of concern" including China and Russia.

"The plan seems to be to open up the middle tier, as

evidenced by the President's tour to the Middle East, although

there are still complications," he said.