Sovereign wealth funds from the Middle East are emerging as key backers of Silicon Valley’s artificial intelligence darlings.
Oil-rich nations such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar are trying to diversify their economies and are turning to technology investment as a hedge. In the past year, funding of AI companies from Middle Eastern countries has increased fivefold, according to data from Pitchbook.
MGX, a new artificial intelligence fund from the United Arab Emirates, was among investors looking to get a piece of OpenAI’s latest fundraising this week, two sources told CNBC. The round is expected to value OpenAI at $150 billion, said the people, who asked not to be identified because the discussions are confidential.
Few venture capital funds have deep enough pockets to compete with the multibillion-dollar checks coming from Microsoft and Amazon. But these sovereign wealth funds have no problem finding cash for AI deals. They are investing on behalf of their governments, which have been helped by rising energy prices in recent years. From the Gulf Cooperation Council, or GCC, the countries’ total wealth is expected to increase $2.7 trillion to $3.5 trillion by 2026, according to Goldman Sachs.
Saudi Arabia’s Public Investment Fund, or PIF, has topped $925 billion and is on an investment spree under Crown Prince Mohammed bin Salman’s “Vision 2030” initiative. The PIF has investments in companies including Uber, while also spending heavily on the LIV golf league and professional soccer.
UAE’s Mubadala has $302 billion under management and Abu Dhabi Investment Authority has $1 trillion under management. Qatar Investment Authority has $475 billion, while Kuwait’s treasury has topped $800 billion.
Earlier this week, Abu Dhabi-based MGX joined an AI infrastructure partnership with BlackRock, Microsoft and Global Infrastructure Partners, aiming to raise up to $100 billion for data center and other infrastructure investments. MGX it was launched as a dedicated AI fund in March, with Abu Dhabi’s Mubadala and AI firm G42 as founding partners.
Mubadala of the United Arab Emirates has also invested in OpenAI competitor Anthropic, and is among the most active venture investors, with eight AI deals in the past four years, according to Pitchbook. Anthropic ruled out taking money from the Saudis in the latest round of funding, citing national security, sources told CNBC.
Saudi Arabia’s PIF is in talks to form a $40 billion partnership with US venture capital firm Andreessen Horowitz. He also created a special artificial intelligence fund called the Saudi Company for Artificial Intelligence, or SCAI.
However, the kingdom’s human rights record remains an issue for some Western partners and startups. The most notable case in recent years was the alleged assassination of Washington Post journalist Jamal Khashoggi in 2018, an event that sparked an international backlash in the business community.
It’s not just the Middle East that’s splashing money into space. French sovereign fund Bpifrance has signed 161 AI and machine learning deals in the past four years, while Singapore’s Temasek has completed 47, according to Pitchbook. GIC, another Singapore-backed fund, has completed 24 deals.
The flood of cash has some Silicon Valley investors worried about the SoftBank phenomenon, citing Masayoshi Son’s Vision Fund. SoftBank specifically backed Uber and WeWork, pushing the companies to high valuations before they went public. WeWork went bankrupt last year after being valued by SoftBank at $47 billion in 2019.
For the US, investing sovereign wealth funds in US companies rather than global rivals such as China has been a geopolitical priority. Jared Cohen of the Goldman Sachs Global Institute said there is a disproportionate amount of capital coming from countries like Saudi Arabia and the United Arab Emirates, and a willingness to deploy it around the world. He is described them as “geopolitically floating states”.
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