Middle Eastern sovereign wealth funds are emerging as major backers of Silicon Valley's artificial intelligence darling.
Oil-rich countries such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar have been seeking to diversify their economies and have turned to technology investments as a hedge. According to Pitchbook, funding for artificial intelligence companies from Middle Eastern sovereign states has increased fivefold in the past year.
MGX, a new artificial intelligence fund from the United Arab Emirates, is among the investors hoping to get a piece of OpenAI's latest funding round this week, two sources told CNBC. The funding round will value OpenAI at $150 billion, said the people, who asked not to be identified because the discussions are confidential.
Few venture funds have deep enough pockets to compete with the multibillion-dollar checks coming from companies like these. Microsoft and Amazon. But these sovereign funds have no problem providing cash for AI deals. They invest on behalf of the government, which has been helped by rising energy prices in recent years. The total wealth of the Gulf Cooperation Council (GCC) countries is expected to increase from $2.7 trillion to $3.5 trillion By 2026, according to Goldman Sachs.
Saudi Arabia's Public Investment Fund (PIF), which is worth more than $925 billion, has been investing heavily as part of Crown Prince Mohammed bin Salman's Vision 2030 initiative. PIF has invested in companies such as Uber, and has also invested heavily in the LIV golf league and professional football.
Mubadala of the United Arab Emirates manages US$302 billion, and the Abu Dhabi Investment Authority manages US$1 trillion. The Qatar Investment Authority has $475 billion in funds, while Kuwait's funds have exceeded $800 billion.
Earlier this week, Abu Dhabi-based MGX joined an AI infrastructure partnership BlackRock, Microsoft and Global Infrastructure Partners, aiming to mobilize up to $100 billion for data center and other infrastructure investments. MGX is roll out In March this year, the fund became a dedicated artificial intelligence fund, with Abu Dhabi-based Mubadala and artificial intelligence company G42 as founding partners.
UAE-based Mubadala has also invested in OpenAI rival Anthropic and is one of the most active venture investors, completing eight AI deals in the past four years, according to Pitchbook data. Sources told CNBC that Anthropic ruled out taking Saudi money in its last funding round, citing national security concerns.
Saudi Arabia's PIF is in talks with US venture capital firm Andreessen Horowitz to establish a $40 billion partnership. It has also launched a dedicated artificial intelligence fund called the Saudi Company for Artificial Intelligence (SCAI).
Still, the country's human rights record remains a problem for some Western partners and startups. The most high-profile case in recent years was the alleged killing of Washington Post reporter Jamal Khashoggi in 2018, which sparked a backlash from the international business community.
It's not just the Middle East that's pouring money into this area. French sovereign fund Bpifrance has signed 161 artificial intelligence and machine learning deals in the past four years, while Singapore's Temasek has completed 47, according to Pitchbook data. Another Singapore-backed fund, GIC, has completed 24 transactions.
The flood of cash has some Silicon Valley investors worried about the SoftBank effect, referring to Son's Vision Fund. SoftBank specifically backed Uber and WeWork, pushing their valuations to astronomical prices before going public. WeWork fell into bankruptcy last year after being valued at $47 billion by SoftBank in 2019.
For the United States, having sovereign wealth funds invest in American companies rather than global rivals such as China has long been a geopolitical priority. Jared Cohen of Goldman Sachs Global Institute said there is a lot of capital coming from countries like Saudi Arabia and the United Arab Emirates and a willingness to deploy it around the world. he descriptive They are called “geopolitical swing countries”.
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