Saudi Arabia’s AI ambitions have shocked the West.
In less than one year, Saudi Arabia has gone from making broad declarations about diversification, to signing data centres worth billions of dollars, to gaining access to the latest chips, and to laying out a plan for selling AI services at a lower price than anywhere on Earth.
Saudi Arabia is now planning to create an unique model which could surpass the work of other countries.
This is the idea of turning cheap electricity into AI and exporting results.
First, power and then everything else
Electricity is at the heart of Saudi Arabian AI strategy. Power. Not software. Power.
Solar projects along the Red Sea Coast produce electricity for less than $0.01 per Kilowatt hour.
This is only a small fraction of what it costs in Europe and parts of America.
This is most important for artificial intelligence at the inference phase, as training large models can be expensive and irregular.
Long-term cost is the result of running them each day and answering billions in prompts.
Two factors drive the cost of inference. Hardware efficiency and electric prices. Saudi Arabia, which cannot produce advanced chips but can use some of the most reliable and cheap power sources available, is able to run these on a cheaper basis.
The strategy is now national policy. A PwC study suggests that AI can boost Saudi Arabia’s GDP more than 12 percent by 2030.
The government prioritised AI Infrastructure under Vision 2030, and placed the execution of AI under HUMAIN.
It is not the goal to have a handful of data centers. The goal is to reset costs for AI services, by computing in places where the power is cheap and abundant.
The full-stack bet on HUMAIN
HUMAIN, which is controlled by the Public Investment Fund (PIF), is led by Tareq Amin. Tareq has a background in telecoms and infrastructure and not as a software founder.
HUMAIN operates as a company and not as a holding. The company builds data centres, platforms for cloud computing, language models, and applications all under the same roof.
By any measure, the company has ambitious plans. The company has stated that it aims to have six gigawatts worth of data center capacity in the middle of 2030.
Earlier site surveys identified over 200 possible locations that had access to land, power and permits. The availability of power is the main bottleneck in most countries. It is a selling point in Saudi Arabia.
HUMAIN also goes beyond infrastructure. The company has developed an AI-driven enterprise operating system whereby tasks can be performed using natural language instead of menus or icons.
The company claims to have AI agents running payroll, legal, and administrative tasks.
Saudi Arabia wants to show that it is not just a server park.
The aim is to demonstrate what happens when AI at large scale within organisations.
Telling the Story of Partners
Saudi Arabia’s AI strategies become clearer by looking at the partners. HUMAIN signed Amazon Web Services up as its global cloud partner, and works with Nvidia on the accelerators needed to power modern AI.
They are working together to create a Riyadh AI Zone, which will handle training as well as inference work, and give AWS customers access to the foundation models.
HUMAIN, on the physical front, has partnered up with AirTrunk. AirTrunk is backed by Blackstone, and Canada Pension Plan Investment Board.
Initial commitments are around three billion dollars to build a campus of data centres.
It is long-term infrastructure money that seeks stable returns. This is infrastructure funding that has a long-term view and seeks stable returns.
The issue of chip access is more sensitive politically. Early deals were focused on the inference-specific architectures of companies such as Groq.
Saudi Arabia has recently obtained licences for the import of tens and thousands of Nvidia top-tier chips. These are estimated to cost around $1 billion.
This volume was not enough to fill several hyperscale campuses but marked a change. Frontier computing is now available to the kingdom.
Sell tokens instead of electricity
Saudi Arabian commercial model is unique. The country does not intend to export electricity. Transporting power is expensive and difficult. Moving data is inexpensive.
HUMAIN is clear in its pitch for AI developers. Use Saudi infrastructure to run your models. Use Saudi electricity. Produce output tokens for a cheaper price than any other place.
This could be a way to sell AI outputs at a price well below the current market rate.
Recent reports cite industry sources who suggest that output tokens can be sold at a price roughly half of the current levels. End users will continue to pay their standard fees.
Whoever controls the computation will be able to capture any margin gaps.
Inference costs would be high for cloud service providers and AI applications companies.
This would create a split on the market. Tasks that require high latency should be kept close to the users. Bulk inference is moved to the cheapest power source.
What can change the global AI economy?
Saudi Arabian approach is fraught with danger. Data centres run hot. Unresolved questions about water efficiency and cooling in a hot climate remain.
Capital alone cannot solve the talent shortage. Riyadh cannot control geopolitical events that affect the availability of advanced chips.
The strategy itself is consistent. The AI is treated as a commodity.
The focus is on those parts of the value-chain where the national advantage matters most. It is also backed up by capital capable of absorbing long repayment periods.
Pricing is the biggest implication for global markets. Saudi Arabia’s success in setting the global benchmark price for AI will have a negative impact on margins elsewhere.
The companies that are dependent on the expensive energy markets have a difficult choice to make. Costs can be passed on to customers, profits reduced or workloads moved.
A change has also occurred in the bargaining position. Saudi Arabia, with its multi-gigawatt demands and large sovereign capital pool, becomes an important buyer for chipmakers and cloud companies.
This leverage goes beyond the pricing to include localisation, data governance, and long-term partnership.
Saudi Arabia will not become the AI center of the world. It is doing something that few other countries can.
The process involves converting electrons to intelligence and then selling the results.
The post Is Saudi Arabia really able to undercut other countries on AI by using low-cost energy? This post appeared on The ICD
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