Middle Eastern sovereign wealth funds are emerging as major backers of Silicon Valley AI companies.
Oil-rich countries like Saudi Arabia, the United Arab Emirates, Kuwait and Qatar have been looking to diversify their economies, turning to technology investments as a hedge. Last year, funding for AI companies by Middle Eastern governments increased fivefold, according to data from Pitchbook.
MGX, a new artificial intelligence fund from the United Arab Emirates, was among investors looking to take a slice of OpenAI’s latest funding round this week, two sources told CNBC. The round is expected to value OpenAI at about $150 billion, the people said, asking not to be identified because the discussions are private.
Few venture capital funds have pockets deep enough to compete with the multi-billion dollar checks coming from the likes of Microsoft and AmazonBut these sovereign funds have no problem providing the money for AI deals. They are investing on behalf of their governments, which have been helped by high energy prices in recent years. The GCC’s combined wealth is expected to rise from $2.7 trillion to $3.5 trillion by 2026, according to Goldman Sachs.
Saudi Arabia’s Public Investment Fund, with assets exceeding $925 billion, has been investing in mega projects as part of Crown Prince Mohammed bin Salman’s Vision 2030 initiative. The PIF has invested in companies such as Uber, while also spending huge sums on the LIV golf league and professional soccer.
The UAE's Mubadala manages assets worth $302 billion, the Abu Dhabi Investment Authority manages $1 trillion, the Qatar Investment Authority manages $475 billion, while the Kuwait Fund's assets exceed $800 billion.
Earlier this week, Abu Dhabi-based MGX joined an AI infrastructure partnership with Black Rock, Microsoft and Global Infrastructure Partners, aiming to raise up to $100 billion for data center and other infrastructure investments. MGX launched as an AI-focused fund in March, with Abu Dhabi’s Mubadala and AI firm G42 as founding partners.
Mubadala also invested in OpenAI competitor Anthropic, which is among the most active investors, having made eight AI deals in the past four years, according to Pitchbook. Anthropic ruled out taking money from the Saudis in its latest funding round, citing national security, sources told CNBC.
Saudi Arabia’s Public Investment Fund is in talks to create a $40 billion partnership with US venture capital firm Andreessen Horowitz, and has also launched a fund dedicated to artificial intelligence called the Saudi Company for Artificial Intelligence, or SCAI.
However, the kingdom’s human rights record remains a problem for some Western partners and startups. The most high-profile case in recent years was the murder of Washington Post journalist Jamal Khashoggi in 2018, an event that sparked an international backlash from the business community.
It’s not just the Middle East that’s pouring money into the space. French sovereign wealth fund Bpifrance has closed 161 deals in AI and machine learning in the past four years, while Singapore’s Temasek has closed 47, according to Pitchbook. GIC, another Singapore-backed fund, has closed 24 deals.
The influx of cash has raised concerns among some Silicon Valley investors about SoftBank’s influence, pointing to Masayoshi Son’s Vision Fund. SoftBank has notably backed Uber and WeWork, sending both companies to sky-high valuations before they went public. WeWork filed for bankruptcy last year after SoftBank valued it at $47 billion in 2019.
For the United States, investing sovereign wealth funds in American companies, rather than global adversaries like China, has been a geopolitical priority. Jared Cohen of the Goldman Sachs Global Institute said there was 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 called them “geopolitical swing states.”
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