After President Donald Trump’s recent diplomatic engagement in Saudi Arabia, it was announced that the kingdom has committed to investing a substantial $600 billion in various initiatives with U.S. companies. This comprehensive agreement encompasses $142 billion earmarked for defense sales, aimed at equipping the nation with cutting-edge warfighting technology and equipment that enhances its military capabilities.
Among the primary beneficiaries of this significant investment are American semiconductor giants Nvidia (NVDA 0.28%) and Advanced Micro Devices (AMD 1.91%). Following the announcement from Trump, both companies disclosed lucrative contracts to supply semiconductors to Humain, a burgeoning artificial intelligence (AI) startup financed by the public investment fund of Saudi Arabia.
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Strategically Replacing Revenue Lost from China with AI Investments
Nvidia has announced its plan to provide Humain with several hundred thousand of its most advanced graphics processing units (GPUs) over the next five years, which will be instrumental in powering the AI data centers that the company intends to establish in Saudi Arabia. The initial phase of this collaboration will see the shipment of 18,000 of its GB300 Grace Blackwell AI supercomputer chips, alongside the provision of InfiniBand networking equipment to ensure high-speed data transfers.
In parallel, the Saudi Data & AI Authority (SDAIA) is set to deploy up to 5,000 Blackwell GPUs to facilitate the development of intelligent smart city solutions. Nvidia is also committed to enhancing local expertise by training thousands of developers in Saudi Arabia and will introduce the nation’s first Omniverse Cloud, a platform designed to simulate and test various physical AI solutions effectively.
Analysts from Bank of America estimate that the potential value of this deal could range between $15 billion and $20 billion throughout the agreement’s duration, translating to annual sales between $3 billion and $5 billion. This financial influx could significantly bolster Nvidia’s market position as it navigates new opportunities.
Additionally, reports indicate that the U.S. government may be on the verge of easing chip export restrictions for the United Arab Emirates. This prospective deal would allow the UAE to import up to 500,000 advanced AI chips annually through at least 2027. Of this total, approximately 20% of the chips would be allocated to Abu Dhabi’s AI firm G42, while the remainder would support various U.S. companies developing data centers in the region.
These strategic agreements are anticipated to help Nvidia compensate for some of the revenue it has lost to China, particularly after the U.S. tightened its export controls on technology to the nation. Previously, China accounted for roughly $17 billion of Nvidia’s revenue in the last fiscal year; however, this figure has reportedly diminished to low single digits for its data center revenue in Q4. Based on the current Q4 run rate, Nvidia’s projected annual revenue could be around $7 billion.
On the other hand, AMD has announced a significant deal valued at $10 billion with Humain to supply the company with chips over the next five years. AMD has indicated that it will provide a comprehensive range of its AI computing portfolio, which encompasses both GPUs and central processing units (CPUs). Furthermore, AMD has signed a memorandum of understanding with SDAIA to explore the implementation of AMD chips in future AI-focused data centers.
During its Q1 earnings announcement, AMD disclosed that it anticipates a $700 million revenue decrease in Q2 as a result of new Chinese export restrictions, with an overall expected reduction of $1.5 billion for the year. The Humain deal, valued at $2 billion annually, is poised to offset a significant portion of this lost revenue.
Identifying the Next Major Trend in AI Growth
Beyond merely replacing lost revenue from China, these agreements signify a potential new trend that could serve as a significant growth catalyst for the semiconductor industry: sovereign investments in artificial intelligence.
Saudi Arabia and the United Arab Emirates are evidently investing heavily in AI and data centers, but they are not alone in this endeavor. Within the Middle East, for instance, Kuwait has aligned with Microsoft in a partnership aimed at positioning Microsoft as a regional leader in AI technology. Moreover, Bahrain and Qatar are also investing significantly to enhance their national AI infrastructures.
Globally, countries like India have formed partnerships with the leading three cloud computing giants to scale their AI infrastructures effectively. Even smaller nations such as Singapore are allocating resources toward developing their AI capabilities.
Simultaneously, it appears that President Trump is prepared to leverage the U.S.’s supremacy in AI semiconductors as a negotiating tool in international trade discussions. As the U.S. seeks to craft a new trade agreement with China, there’s a possibility that the current chip restrictions could be reconsidered, potentially opening up further opportunities for companies like Nvidia and AMD.
Evaluating the Investment Potential of Nvidia and AMD Stocks
Both Nvidia and AMD are strategically positioned to capitalize on the growing spending in AI infrastructure. Nvidia stands out as the dominant player in the GPU market, holding over 80% market share, and is expected to maintain robust growth as investments in data centers continue to increase.
Meanwhile, AMD has established itself as a prominent supplier of CPUs for data centers and has carved out a significant niche in the GPU market for AI inference. With the inference market projected to expand rapidly, AMD’s positioning is favorable for future growth.
Additionally, both companies’ stocks are currently attractively priced, trading at around a 30 times forward price-to-earnings ratio (P/E), with substantial growth potential still on the horizon.
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Consequently, both Nvidia and AMD stocks appear to be compelling investment opportunities at this moment, especially given the numerous growth prospects that lie ahead.
Bank of America is an advertising partner of Motley Fool Money. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Bank of America, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
