Middle East sovereign wealth funds are rapidly becoming major players in top artificial intelligence start-ups in Silicon Valley. To diversify their economies, countries such as Saudi Arabia, United Arab Emirates (UAE), Kuwait, and Qatar are directing investment in emerging technologies like a smart hedge against changing oil prices. Pitchbook data indicates funding of AI companies by sovereign funds has increased fivefold in the last year.
A new AI fund out of the UAE, MGX, is reportedly among such players as it pursues a stake in OpenAI’s latest funding round, which sources expect will place the company at $150 billion. According to sources familiar with discussions and speaking on the condition of anonymity, MGX shows an interest in this kind of high-profile investment.
While traditional venture capital funds are behind Silicon Valley giants, like Microsoft and Amazon, the money that Middle Eastern sovereign funds have is enough to finance significant investments in AI. Supported by high energy costs, these funds control trillions of dollars; for instance, the wealth of the GCC states is expected to double from $2.7 trillion to $3.5 trillion by 2026, said Goldman Sachs.
The Saudi Public Investment Fund, already over $925 billion, is very actively investing as part of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative. These investments have included firms like Uber and funded the LIV Golf League to the brim. Other major funds include UAE’s Mubadala, which has $302 billion under management, Abu Dhabi Investment Authority with $1 trillion, and Qatar Investment Authority with $475 billion.
MGX recently co-raised $ up to $100 billion through BlackRock, Microsoft, and Global Infrastructure Partners for AI infrastructure investments as launched in March 2022.
Despite the foreign investment, however, there is one major issue that such partnerships entail regarding Saudi Arabia’s human rights record, especially now that the international community has been outraged after the 2018 killing of journalist Jamal Khashoggi.
This is not a Middle Eastern phenomenon; Bpifrance in France, and Temasek in Singapore, for example, have been very active, concluding hundreds of AI deals during the last few years. Analysts even underline geopolitical meanings of this increased presence of sovereign wealth funds in the US market, pointing out that it is not by chance that investments in American companies over future opponents such as China are preferred.
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