Egypt Sparks Chinese-American Competition in AI Chip Market

The Egyptian government has received an offer from Chinese company Huawei Technologies to build dedicated data centers for military, surveillance, and other government sectors, while American companies are preparing a competing proposal, according to Bloomberg.

As the largest Chinese rival to Nvidia, Huawei responded to a tender issued by Cairo, proposing to export 1,408 of its latest advanced Ascend 950 chips to create a cloud platform for training artificial intelligence models.

The Chinese proposal also includes 600 additional chips, either from the same series or the older 910B model, to run two inference clusters used for operating AI models after training, according to people familiar with the matter and documents reviewed by Bloomberg.

According to the documents, Huawei has laid out a 12-month plan to build the project's infrastructure.

Chinese-American Rivalry

If successful, the project would mark an early but crucial step in China’s effort to challenge American dominance over global AI infrastructure.

It would position Huawei as a key provider of AI technologies in Africa’s second-largest economy and give it a foothold in the Middle East, where the United States is investing heavily in the most profitable AI data center markets, particularly in the UAE and Saudi Arabia.

The project could also become the first known export deal for Huawei’s Ascend accelerators after more than a year of attempts.

Huawei declined to comment, while Egypt’s Ministry of Foreign Affairs did not respond to Bloomberg’s inquiries on the matter.

Egypt Ignites Chip Race

When the Trump administration learned of the offer, the U.S. Department of State moved swiftly to counter it, contacting companies including Nvidia, AMD, and Microsoft to explore forming an American consortium that could present a competing proposal for the AI chips offered by Huawei, according to people who requested anonymity due to the sensitivity of the discussions. Microsoft declined to comment, while Nvidia and AMD did not respond to requests for comment.

Trump administration officials had previously warned countries around the world that using certain Huawei accelerators without Washington’s approval could expose users to legal penalties, but it remains unclear whether these warnings were raised during talks with Cairo.

Egypt now finds itself at the heart of the latest round of competition between the world’s two leading technological powers, highlighting the geopolitical challenge facing Global South nations striving to claim a share of the AI pie.

This may be the first time the United States and China are directly competing for the same government procurement contract to establish an AI data center.

The outcome of this competition will test Huawei’s chip capabilities, the nascent efforts of the Trump administration to deploy semiconductor diplomacy in emerging markets, and Egypt’s ability to balance between two increasingly divergent technological systems while maintaining control over its own AI future.

A U.S. State Department spokesperson said: "Egypt is one of dozens of countries we are engaging on advancing American leadership in AI technology."

He added: "U.S. AI benefits the world," emphasizing that the United States "is ready to partner with countries in developing and deploying AI in ways that respect their sovereignty and strengthen their capabilities."

Huawei’s Strategy Toward Africa

Huawei’s approach in Africa and globally closely mirrors Beijing’s diplomatic relations with each country, according to a person familiar with the company’s strategy. The Chinese tech giant is actively courting African governments in areas including education and healthcare, including Egypt and Kenya. Kenya hosts a U.S.-backed data center, previously launched by former President Joe Biden as a model for his AI diplomacy on the continent.

Huawei’s proposal to Egypt includes a partnership with iFlytek, a Chinese surveillance technology giant listed on the U.S. blacklist since 2019, alongside Huawei.

The solutions offered by the two companies include technologies for vehicle and individual recognition based on national population databases, along with broader "situational awareness" systems integrated into a platform enabling "panoramic city view on a single screen."

In one slide from a 102-page presentation, the emblem of China’s Ministry of Public Security appeared among examples described by the companies as "core video applications." iFlytek did not respond to a request for comment.

It remains unclear what applications the American proposal might focus on, if any, or whether Washington will impose specific usage restrictions. Since 2023, shipments of AI chips to Egypt have required U.S. approval, giving the Trump administration room to impose conditions through export licenses.

Egypt Tests Global Demand for Huawei Chips

Huawei’s proposal is built on decades of presence in Egypt, home to over 100 million people, as the company has deepened its cooperation with Beijing in recent years across fields ranging from trade to military exercises.

Winning the data center contract would significantly boost Huawei’s footprint in a strategically vital region for its global vision and serve as proof of actual external demand for its AI chips, despite the company still lagging far behind Nvidia in production volume and capabilities.

Conversely, American AI companies have historically not viewed Egypt as a target market, nor did it hold significant priority within the Trump administration’s AI diplomacy.

Yet, their rapid entry into negotiations over chip exports reveals the extent of Washington’s concern over the global spread of Chinese AI equipment, especially after the Trump administration attempted to preempt Chinese expansion through controversial policy shifts in other parts of the Middle East.

Nevertheless, the number of 2,008 chips remains relatively limited. According to standard benchmarks for training AI models, the computational power of this number of Huawei 950DT accelerators is roughly equivalent to just a few hundred of the most powerful commercially available Nvidia chips—significantly below the computing capacity typically used by Western firms.

Huawei Pushes Its Strongest Chips Abroad

If completed, a successful deal would be a major boost for Huawei in both demand and supply, following challenges in producing large quantities of AI chips due to U.S. restrictions on acquiring essential manufacturing equipment, despite ongoing efforts to increase output.

Last year, Huawei attempted to attract countries in the Gulf and Southeast Asia with offers to supply several thousand processors, but was only prepared to sell its second-best chips at the time, as production of the more advanced 910C model remained limited.

Bloomberg reported at the time that there was no indication Huawei had completed any Ascend chip exports, and no clear signs yet that this has changed.

Now, Huawei is offering Egypt its newest and most powerful processors, which surpass the capabilities of the 910C model.

The company also promoted the 950DT chips during an event in South Korea last year, according to local media. A Huawei executive overseeing cloud computing business in Latin America told the South China Morning Post that the company is also considering launching these accelerators in the region.

This exact export strategy is precisely what Nvidia and its political allies have warned about. So far, quantities remain limited, and Huawei’s efforts to attract overseas customers do not necessarily mean it has succeeded in meeting domestic demand, where companies like DeepSeek and Moonshot continue to rely on Nvidia equipment.

American Warning Tightens the Noose on Huawei Chips

Yet Huawei’s offer in Egypt reflects growing confidence in the telecom giant, which enjoys full backing from Beijing in its bid to compete with Nvidia inside and outside China.

In fact, initiating small shipments to establish a foothold, especially in non-traditional markets, reiterates the strategy that helped Huawei become the world’s largest supplier of telecommunications equipment.

Meanwhile, Washington was never under the illusion that strict restrictions—even those on chip manufacturing equipment—would completely halt Huawei’s progress in AI semiconductors.

But leveraging its prior experience in the telecoms conflict, the Trump administration moved early to try to curb Huawei’s AI chip exports, partly relying on guidance warning against the use of the company’s chips.

This warning rests on complex U.S. legal authorities extending beyond national borders, surprising other governments but proving effective as a deterrent.

Last year, Malaysia announced a national AI system powered by Huawei chips, comparable in scale to the project proposed by the company in Egypt, but quickly distanced itself after raising concerns at the White House.

The Malaysian Investment Ministry stated then: "Malaysia remains committed to full compliance with all applicable export control laws." It added: "Malaysia also affirms its sovereign right to shape policies aligned with its national interests."

American Funding Enters the Chip Battle

While Malaysia is among the fastest-growing AI data center markets globally, Egypt’s sector, and Africa’s broadly, remains much smaller. Egypt’s second National AI Strategy aims to raise the sector’s contribution to GDP to 7.7% by 2030.

Physical infrastructure is a cornerstone of achieving this vision. As Egypt does not locally manufacture AI chips, it must import them either from the United States or China.

Until recently, China was unwilling to sell these processors, while the United States has imposed restrictions on exporting them to Egypt and nearly 40 other countries since 2023, extending earlier restrictions previously placed on China.

Last year, the Trump administration canceled a plan from its predecessor, Joe Biden, to expand these restrictions globally, fearing unintended consequences that could leave global markets open to Huawei. But Egypt remained under restrictions, though this did not necessarily pose a barrier to developing its AI infrastructure, as the country was simply not a major commercial market for Nvidia or AMD.

The Trump administration has a plan for countries like Egypt through an export promotion program aimed at providing comprehensive AI solutions backed by U.S. government funding. The initiative targets Global South nations that may turn to cheaper Chinese alternatives, as well as markets where American companies may see insufficient commercial viability without federal support.

The U.S. State Department spokesperson referenced this initiative, launched over a year ago and not yet resulting in any deals, when asked about the American proposal for Egypt; however, he did not clarify whether federal funding was specifically being considered for Egypt.