Currently, in the Middle East, sovereign wealth funds, through their specific financial actions, demonstrate a clear and unambiguous desire to become the main sponsors of Silicon Valley in the area of developments related to artificial intelligence.
The countries of the mentioned region, such as the United Arab Emirates, Saudi Arabia, Qatar, and Kuwait, have large reserves of oil, which is the source of their earnings. At the same time, these countries are striving to make the transition from an economic model based on a kind of financial effect from mining, through diversification focused on more innovative concepts. In the context of the relevant goal, investing in artificial intelligence is a logical decision, since AI has huge potential, including the ability to fundamentally transform production processes.
As part of the drive to transition to a new economic model, Middle Eastern countries are paying attention to investing in the technology sector as a hedging tool. Data from Pitchbook indicate that over the past year, the countries of this region have increased the volume of financial injections into companies operating in the artificial intelligence industry five times.
The media, citing two anonymous insiders, report that MGX, a new machine intelligence fund based in the UAE, was among the investors who intended to participate in OpenAI’s latest fundraiser last week. The interlocutors of the journalists, who used the right of anonymity due to the confidential nature of the information, said that the value of the mentioned company, which developed the world’s most popular chatbot based on artificial intelligence called ChatGPT, reached the $150 billion mark in the specified round.
It is worth noting that currently there are not many venture capital funds on a global scale that have financial resources sufficient to fully compete with the volumes of investments that proceed the machine intelligence industry from business giants such as Microsoft and Amazon.
According to media reports, sovereign wealth funds based in the Middle East nowadays have no problems obtaining cash to conclude deals with companies operating in the area of artificial intelligence. These funds invest on behalf of their governments, which in recent years have been in a good situation in terms of the financial condition. An increase in energy prices contributes to the corresponding state of affairs.
Goldman Sachs forecasts provide that by 2026 the total wealth of the Gulf Cooperation Council states will increase to $3.5 trillion from the current $2.7 trillion.
The Saudi Public Investment Fund, or PIF, has exceeded $925 billion. This fund is actively investing in the framework of the initiative of Crown Prince Mohammed bin Salman called Vision 2030. PIF makes financial injections in several companies including Uber. This fund also allocates significant funds to the LIV Golf League and professional soccer.
UAE’s Mubadala has $302 billion under management. The Abu Dhabi Investment Authority manages $1 trillion. At the same time, the Qatar Investment Authority has $475 billion. The volume of the Kuwaiti fund is more than $800 billion.
Last week, Abu Dhabi-based MGX joined a partnership in the artificial intelligence area. BlackRock, Microsoft, and Global Infrastructure Partners are also participating in this project. The goal of the relevant partnership is to raise as much as $100 billion for data centers and other investments in artificial intelligence infrastructure.
In March, MGX was launched as a dedicated foundation in the area of machine intelligence. In this case, the founding partners are Mubadala from Abu Dhabi and the company G42, which is a developer of artificial intelligence.
Mubadala has also invested in Anthropic, which has developed a machine intelligence-based chatbot called Claude and is one of OpenAI’s main competitors. It is worth noting that in this case, one of the most active venture investors from the Middle East is mentioned. Pitchbook data shows that over the past four years, Mubadala has concluded eight deals in the artificial intelligence industry.
The media, citing anonymous insiders, report that Anthropic has abandoned its involvement in the practice of raising investment funds from sources based in Saudi Arabia. The journalists claim that the relevant decision was made by the company as part of the last round of financing. According to media reports, Anthropic explained the refusal to receive investment funds from Saudi Arabia for reasons of national security.
PIF, according to journalists, is currently negotiating a partnership with the US venture capital company Andreessen Horowitz. Expected. that the financial volume of this cooperation, if it is implemented in the space of objective reality, will amount to $40 billion. PIF has also launched a dedicated AI fund called Saudi Company for Artificial Intelligence, or SCAI.
It is worth noting that some startups refrain from interacting with Saudi Arabia in the machine intelligence industry and other areas of activity for reasons that can be classified as ideological. In this case, the human rights situation in the mentioned country is a kind of obstacle. Some partners and startups from Western countries perceive the specified situation as fundamentally contrary to the principles of democratic values and refuse to cooperate with Saudi Arabia. In recent years, the most high-profile case in the context of this problem has been the alleged killing of journalist Jamal Khashoggi in 2018 in the mentioned country. The international business community reacted extremely negatively to the accident. The corresponding reaction has significantly transformed the perception of Saudi Arabia as a partner in various projects, including in the area of advanced technologies. In this case, negative changes are implied.
It’s worth noting that in other regions of the world, there is also a high level of investment activity concerning the artificial intelligence industry and readiness for intensive interaction with AI developers. For example, the French sovereign fund Bpifrance has concluded 161 deals in the area of digital intelligence and machine learning over the past four years. Singapore’s Temasek has completed 47 deals in the relevant category. GIC, another fund backed by Singapore, has completed 24 similar deals. The relevant information was published by Pitchbook.
The flood of cash has caused some Silicon Valley investors to worry about the so-called SoftBank effect. In this case, it means the Vision Fund of Masayoshi Son, chief executive officer of the mentioned Japanese business giant. SoftBank, for example, backed Uber and WeWork, as a result of which the market capitalization indicators of these companies rose to excessive levels before they became public. Last year, WeWork went bankrupt. In 2019, SoftBank valued this company at $47 billion.
For the United States, gaining sovereign wealth funds to the practice of making financial injections into US companies is what can be described as a priority due to Washington’s geopolitical strategy. In this case, it is important for the country that financial flows are not directed towards its global competitors, such as China.
Jared Cohen of Goldman Sachs Global Institute says that a disproportionate amount of capital is coming from countries such as the UAE and Saudi Arabia. In this context, it was also noted separately that the specified Middle Eastern states are ready to deploy capital around the world. Jared Cohen described Saudi Arabia and the UAE as geopolitical swing countries.
As we have reported earlier, Abu Dhabi Seeks to Expand Partnership With Washington Through AI.
