UAE banking on AI investment to redefine economic future

The United Arab Emirates is investing heavily in artificial intelligence technology as part of a sweeping economic transformation plan, signing multibillion-dollar technology deals and launching a landmark AI partnership with the United States.

In a visit to Abu Dhabi in May, U.S. President Donald Trump’s signed commercial agreements worth more than $200 billion and committed to a further $1.4 trillion investment over the next decade, underscoring the UAE’s policy to anchor its non-oil economy in advanced technologies, including AI and cloud computing.

During the U.S. delegation’s visit to the Emirate the US-UAE AI Acceleration Partnership was announced, with the aim of deepening bilateral cooperation on artificial intelligence and related infrastructure.

“Bilateral trade talks focused on artificial intelligence, advanced technologies, and semiconductors, culminating in the launch of the US-UAE AI Acceleration Partnership,” said Vijay Valecha, Chief Investment Officer at Century Financial.

The Gulf nation also plans to invest in major U.S. AI firms including OpenAI and xAI, while Abu Dhabi-based Group 42 will build a five-gigawatt AI data centre, set to become the largest of its kind outside the United States.

The AI push forms part of a broader strategy to diversify the UAE economy away from hydrocarbons, the Arabian Business website has reported. Non-oil sectors accounted for 75% of GDP in the first nine months of 2024, according to the UAE Ministry of Economy, with the non-oil economy expanding 4.5%.

“The UAE’s projected [GDP] growth in 2025 stands in sharp contrast to a global outlook marked by mounting risks and downward revisions,” Osama Al Saifi, Managing Director for MENA at Traze, an online foreign exchange trading platform. “This divergence is largely explained by the UAE’s strong performance in non-oil sectors, supported by expansion in tourism, transport, construction, and financial services, as well as sustained momentum in foreign direct investment and trade.”

The International Monetary Fund expects the UAE’s economy to grow by 4% in 2025 and 5% in 2026, making it the fastest-growing economy in the Gulf Cooperation Council. In contrast, global trade growth is forecast to slow to 1.7% this year, with a possible recession in the U.S. or Europe still looming, according to analysts at JPMorgan and Fitch.

The timing of the UAE’s AI investment spree coincides with a deteriorating global economic outlook, according to Al Saifi. “The region is better equipped than in previous cycles, though not entirely shielded,” he said.

“A recession in the U.S. or Europe would likely exert downward pressure on global oil demand and weigh on fiscal performance. Nevertheless, substantial sovereign wealth assets, contained inflation, and firm domestic demand provide a degree of protection.”

The UAE’s inflation rate is expected to remain stable at around 2% in 2025, with consumer spending forecast to expand 4.3%, supported by easing interest rates and robust domestic demand, Al Saifi added.

Hamza Dweik, Head of Trading at Saxo Bank MENA, commented: “A mild recession in the U.S. and parts of Europe during the second half of the year is increasingly likely, as the delayed effects of tight monetary policy, persistent inflation, and weakening manufacturing data converge.

“However, the UAE’s strong macroeconomic fundamentals, active IPO pipeline, and diversified revenue streams position it as a relative safe haven in the global landscape.”

Meanwhile, PwC estimates the AI sector could contribute over $320 billion to the Middle East economy by 2030, with the UAE positioned to capture the lion’s share through early infrastructure deployment, regulatory reform and foreign investment attraction.

“Sectors with strong global linkages – such as logistics, real estate (particularly off-plan investment-driven projects), and non-oil exports like aluminum and petrochemicals – are most vulnerable to a potential U.S. recession,” Dweik said.