In a move that could have significant implications for the global tech industry, the U.S. government has reportedly slowed down the issuance of licenses for the export of AI chips to the Middle East.

What Happened: The U.S. has put a temporary halt on the export of artificial intelligence (AI) chips to the Middle East, a decision that is affecting companies like Nvidia Corp. (NASDAQ:NVDA) and Advanced Micro Devices Inc. (NASDAQ:AMD), Bloomberg reported.

The U.S. government is currently conducting a national security review of AI development in the region.

The review is focused on high-volume sales, particularly in countries such as the United Arab Emirates and Saudi Arabia, which are looking to import large quantities of AI chips for their data centers.

The Middle East has been actively investing in AI development to diversify its economy beyond oil.

The U.S. plays a crucial role in this initiative, with both the UAE and Saudi Arabia showing their readiness to comply with U.S. requests to separate from Chinese supply chains or completely divest from Chinese technology, according to Bloomberg.

However, concerns from the U.S. government about potential access by Chinese companies to advanced chips through data centers in the Middle East have led to a temporary halt.

This action is part of a broader U.S. effort to prevent advanced semiconductors and manufacturing equipment from reaching China, fearing their use in strengthening China's military capabilities.

Why It Matters: Earlier in May, the Biden administration unveiled a $285 million funding for a new semiconductor institute, aimed at boosting domestic chip production.

This move was seen as a response to China's increased semiconductor spending, which has raised concerns about the U.S.'s technological leadership.

Meanwhile, China has been making strides in its semiconductor industry, despite U.S. sanctions, achieving mass production of optical chips at a low cost.

The U.S. government's latest move to restrict AI chip exports to the Middle East is a clear indication of its efforts to protect its technological advantage and prevent China from accessing advanced American technology.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.