Sovereign wealth funds out of the Middle East are emerging as key backers of Silicon Valley’s artificial intelligence darlings.
Oil-rich nations like Saudi Arabia, United Arab Emirates, Kuwait and Qatar have been seeking to diversify their economies, and are turning to tech investments as a hedge. Prior to now yr, funding for AI corporations by Middle-Eastern sovereigns has increased fivefold, in line with data from Pitchbook.
MGX, a recent AI fund out of The United Arab Emirates, was amongst investors seeking to get a slice of OpenAI’s latest fundraise this week, two sources told CNBC. The round is ready to value OpenAI at $150 billion, said the people, who asked to not be named since the discussions are confidential.
Few enterprise funds have deep enough pockets to compete with the multibillion-dollar checks coming from the likes of Microsoft and Amazon. But these sovereign funds haven’t any problem coming up with money for AI deals. They invest on behalf of their governments, which have been helped by rising energy prices in recent times. The Gulf Cooperation Council, or GCC, countries’ total wealth is predicted to rise from $2.7 trillion to $3.5 trillion by 2026, in line with Goldman Sachs.
The Saudi Public Investment Fund, or PIF, has topped $925 billion, and has been on an investing spree as a part of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative. The PIF has investments in corporations including Uber, while also spending heavily on the LIV golf league and skilled soccer.
UAE’s Mubadala has $302 billion under management, and the Abu Dhabi Investment Authority has $1 trillion under management. Qatar Investment Authority has $475 billion, while Kuwait’s fund has topped $800 billion.
Earlier this week, Abu Dhabi-based MGX joined a partnership on AI infrastructure with BlackRock, Microsoft and Global Infrastructure Partners, aiming to lift as much as $100 billion for data centers and other infrastructure investments. MGX was launched as a dedicated AI fund in March, with Abu Dhabi’s Mubadala and AI firm G42 as founding partners.
UAE’s Mubadala has also invested in OpenAI rival Anthropic, and is amongst essentially the most energetic enterprise investors, with eight AI deals previously 4 years, in line with Pitchbook. Anthropic ruled out taking money from the Saudis in its last funding round, citing national security, sources told CNBC.Â
Saudi Arabia’s PIF is in talks to create a $40 billion partnership with U.S. enterprise capital firm Andreessen Horowitz. It also launched a dedicated AI fund called the Saudi Company for Artificial Intelligence, or SCAI.
Still, the dominion’s human rights record stays a difficulty for some Western partners and start-ups. Probably the most notable case in recent times was the alleged killing of Washington Post journalist Jamal Khashoggi in 2018, an event that triggered international backlash within the business community.
It is not just the Middle East spraying money into the space. French sovereign fund Bpifrance has inked 161 AI and machine learning deals previously 4 years, while Temasek out of Singapore has accomplished 47, in line with Pitchbook. GIC, one other Singapore-backed fund, has accomplished 24 deals.
The flood of money has some Silicon Valley investors frightened a few SoftBank effect, referring to Masayoshi Son’s Vision Fund. SoftBank notably backed Uber and WeWork, pushing the businesses to sky-high, valuations before going public. WeWork spiraled into chapter 11 last yr after being valued by SoftBank at $47 billion in 2019.
For the U.S., having sovereign wealth funds put money into American corporations, and never in global adversaries like China, has been a geopolitical priority. Jared Cohen of Goldman Sachs Global Institute said there is a disproportionate amount of capital coming from nations like Saudi Arabia and UAE, and a willingness to deploy it around the globe. He described them as “geopolitical swing states.”
WATCH: OpenAI is the indisputable leader in AI supercycle
