Sovereign wealth funds from the Middle East are proving to be key backers of Silicon Valley’s darlings in the sector of artificial intelligence.
Oil-rich countries like Saudi Arabia, the United Arab Emirates, Kuwait and Qatar try to diversify their economies, counting on technology investments as a hedge. In the past 12 months, funding for AI firms by Middle Eastern states has increased fivefold, in response to data from Pitchbook.
MGX, a brand new AI fund based within the United Arab Emirates, was among the many investors looking for a bit of OpenAI's latest capital raise this week, two sources told CNBC. The round is predicted to value OpenAI at $150 billion, said the people, who asked to not be identified since the talks are confidential.
Only just a few enterprise capital funds have sufficient resources to take care of the billion-dollar checks from firms like Microsoft And Amazon. But these sovereign wealth funds don’t have any problem raising money for AI deals. They invest on behalf of their governments, which have been helped by rising energy prices lately. The total wealth of the Gulf Cooperation Council (GCC) countries is predicted to rise by 2.7 to three.5 trillion US dollars by 2026, in response to Goldman Sachs.
The Saudi Public Investment Fund (PIF) has now reached $925 billion and is investing heavily as a part of Crown Prince Mohammed bin Salman's Vision 2030 initiative. The PIF invests in firms similar to Uber and in addition spends heavily on the LIV golf league and skilled soccer.
The United Arab Emirates' Mubadala manages $302 billion and the Abu Dhabi Investment Authority $1 trillion. The Qatar Investment Authority has $475 billion, while the Kuwaiti fund has $800 billion.
Earlier this week, Abu Dhabi-based MGX entered into an AI infrastructure partnership with BlackRock, Microsoft and Global Infrastructure Partners, with the goal of raising as much as $100 billion for data centers and other infrastructure investments. MGX was began as a dedicated AI fund in March with Abu Dhabi-based Mubadala and AI company G42 as founding partners.
UAE-based Mubadala has also invested in OpenAI competitor Anthropic and is amongst essentially the most lively enterprise capitalists with eight AI deals previously 4 years, in response to Pitchbook. Anthropic ruled out taking money from the Saudis in its latest funding round for national security reasons, sources told CNBC.
Saudi Arabia's PIF is currently negotiating a $40 billion partnership with US enterprise capital firm Andreessen Horowitz and has also launched a dedicated AI fund called Saudi Company for Artificial Intelligence (SCAI).
Still, the dominion's human rights record stays a difficulty for some Western partners and start-ups. The most notable case lately was the suspected murder of Washington Post journalist Jamal Khashoggi in 2018, an event that sparked backlash within the business community internationally.
It's not only the Middle East that's pumping money into the space. French sovereign wealth fund Bpifrance has signed 161 AI and machine learning deals previously 4 years, while Singapore's Temasek has signed 47, in response to Pitchbook. GIC, one other Singapore-backed fund, has signed 24 deals.
The flood of money has some Silicon Valley investors frightened there could possibly be a SoftBank effect, pointing to Masayoshi Son's Vision Fund. SoftBank has notably backed Uber and WeWork, driving the businesses to dizzying heights ahead of their IPOs. WeWork fell into chapter 11 last 12 months after SoftBank valued the corporate at $47 billion in 2019.
For the US, it’s a geopolitical priority that sovereign wealth funds spend money on American firms and never in global opponents similar to China. Jared Cohen of the Goldman Sachs Global Institute said that a disproportionate amount of capital is coming from countries similar to Saudi Arabia and the United Arab Emirates and that there’s a willingness to make use of it worldwide. He described They are called “geopolitical swing states.”
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