Global artificial intelligence deals under the Trump administration this year have thrust “sovereign AI” into the limelight, bringing to life a new engine to power the AI investment cycle. While the first major wave of AI was tied to innovation spurred by private sector tech companies, Wall Street is now looking for opportunities that are tied to the growth from the public sector. These so-called sovereign AI deals involve a nation’s capabilities to produce and control its own AI infrastructure, data, regulations and networks. The term isn’t new, but analysts and investors are taking notice of the trend given U.S. President Donald Trump ‘s enthusiasm to strike AI deals between domestic tech giants and select foreign allies. In May, the president scrapped Biden-era U.S. chip export restrictions , known as the “AI diffusion rule.” That move helped pave the way for Nvidia and Advanced Micro Devices to supply chips to Saudi company Humain . “Sovereign AI has risen from the ashes of the Biden AI Diffusion rule to now squarely fit with the Trump Administration’s goals to reshape allies in the Middle East around American technology,” Ben Reitzes, head of technology research at Melius Research, said in a May note to clients. “Nvidia (along with even AMD and Cisco) now have a spring in their step. … This trend is just starting.” Some nations have also released long-term frameworks for their AI public and commercial infrastructure strategies. Canada last December launched the Canadian Sovereign AI Compute Strategy, while India kicked off its IndiaAI Mission in March 2024 . Further, last year, a bipartisan group of U.S. senators rolled out a road map for artificial intelligence policy, seeking a $32 billion annual investment in AI research and development by 2026. Underpinning this trend is the belief that AI will be a key tool in influencing global power dynamics. “With c. $16tn annual global economic value on the line, AI is becoming key in setting the new world order,” Bank of America analyst Haim Israel said in a May note. “It is not just the race for technological development but also for resources, supply chains, regulation and standards that are on the line,” the analyst added. “Whoever controls AI could have an advantage, possibly reshaping the geopolitical balance of power.” Bank of America estimates the global sovereign AI market could be worth $50 billion annually and lead to an “AI infrastructure opportunity” ranging from $450 billion to $500 billion, according to another May note to clients. The firm estimates that at least $2.5 trillion in funding toward AI investments and partnerships have been announced so far this year. This includes projects from Big Tech, recent pledges from the Middle East and North Africa region, the Stargate project — which is a joint venture between OpenAI, Oracle and Softbank — and efforts in the European Union . “These should increase the rollout of AI and improve the economics,” Bank of America’s Israel said. A new driver for leading AI stocks To capture this momentum, major tech companies are building out product portfolios tied to sovereign AI, framing the technology as a catalyst for national economic and industry growth, national security enforcement, and scientific discovery. For starters, Cisco Systems is “the sovereign AI player no one talks about,” Reitzes said in a June 2 note to clients. In May, the networking giant announced it would partner with Saudi Arabia’s Humain to build AI infrastructure. Reitzes thinks investors are overlooking the value of Cisco’s recent deals in the Middle East , as he said greater sovereign demand could lead the company to see a pickup in AI product orders and spur a breakout in shares. He reiterated his buy rating and $78 price target on the stock, which suggests nearly 20% upside from Thursday’s close. Cisco shares have risen 8% this year. “Middle Eastern sovereign entities are unproven, and the investment figures seem cartoonish — but Cisco may have achieved the equivalent of adding a hyperscaler to its customer list,” Reitzes wrote. “The company boasts an excellent longstanding relationship with the CEO of Saudi’s HUMAIN and other leaders of UAE and Qatar entities — who are not short on cash.” Cisco has seen rapid growth in its switching business, which has attracted demand from cloud data center customers. In the fiscal third quarter , Cisco’s AI infrastructure orders exceeded expectations for the second quarter in a row, Reitzes noted. The company is “getting on the right side of AI, which can help expand its multiple,” Reitzes said. “With HUMAIN, UAE and Qatar, these AI orders could multiply — and start to catch investors’ attention and contribute to an acceleration in switching later in FY26 and FY27.” Analysts have also pointed to chipmakers Nvidia and AMD as the obvious leaders of sovereign AI, given their multiyear AI infrastructure partnerships with Humain. AMD signed a deal with Humain: A $10 billion collaboration to deploy 500 megawatts of AI compute capacity over the next five years. The agreement involves AMD’s deployment of its Instinct GPUs, EPYC processors and ROCm open software ecosystem. Nvidia said it is deploying 18,000 of its most advanced GB300 Grace Blackwell chips to Humain. On news of the Humain deal, Bank of America’s Vivek Arya reiterated his buy ratings on Nvidia and AMD and lifted his price targets on each stock by $10 to $160 and $130, respectively, citing “upside to long-term AI opportunity.” Arya called the Humain partnership “an important win” for AMD. “Conceptually this would be the first time for AMD on a ‘similar’ footing as NVDA in terms of engagement in large projects,” the analyst said in a note. “However, NVDA appears to be getting direct awards, while AMD appears to be engaged in a [joint venture]-like approach (with Cisco) with some unspecified level of investments.” The trickle-down impact of sovereign AI investments Analysts and investors think that growth in sovereign AI will have knock-on positive effects on other parts of the AI industry — such as foundry, optical and memory technology companies. In addition to Nvidia and AMD, T. Rowe Price portfolio manager Tony Wang called out Arista Networks and Broadcom as strong plays for exposure to AI leaders as well as to companies building projects abroad. “I think Nvidia would be the most standard way that the world will build on. Broadcom is more custom,” he said. Wang manages T. Rowe Price’s Science & Technology Fund (PRSCX) , and its holdings include Nvidia, Broadcom, AMD and Arista Networks, as of March 31. Bank of America’s Arya named Marvell Technology another beneficiary of the trend and is bullish on the semiconductor company’s earnings growth over the next several years. Though Wall Street is growing keen on this trend now, tech CEOs have been calling for the push of government-led AI investments since the early innings of the artificial intelligence boom. Nvidia CEO Jensen Huang and IBM CEO Arvind Krishna have called for countries to continue building out their sovereign AI capabilities. In 2023, Krishna reportedly advocated for governments to set up large language models, national AI computing centers and common data sets for specific use cases. Huang said on Nvidia’s May 28 earnings call that “sovereign AI is a new growth engine for Nvidia.” During a fireside chat in 2023, he also highlighted “a recognition that every region and every country needs to build their sovereign AI.” The call for greater AI investment goes back even further. In 2021, a group of experts chaired by former Google CEO Eric Schmidt warned about increasing competition between the U.S. and China “in the AI era” and suggested a government AI investment plan that wound up very similar to the one U.S. lawmakers proposed in 2024.
