Sovereign wealth funds from the Middle East are increasingly investing in Silicon Valley’s AI sector as part of their efforts to diversify their economies.
Nations like Saudi Arabia, the UAE, Kuwait, and Qatar are using tech investments as a hedge against oil dependency, according to CNBC.
Over the past year, funding for AI companies from these sovereign funds has surged fivefold, according to Pitchbook data.
MGX, a new AI fund from the UAE, is reportedly among the investors interested in OpenAI’s latest fundraising round, which could value the company at $150 billion.
Unlike traditional venture funds, which may struggle to compete with the massive investments from Microsoft and Amazon, these sovereign funds are well-positioned to finance significant AI deals, bolstered by increased energy revenues in recent years.
According to Goldman Sachs, the total wealth of Gulf Cooperation Council (GCC) countries is projected to increase from $2.7 trillion to $3.5 trillion by 2026.
The Saudi Public Investment Fund has surpassed $925 billion in assets and is actively investing as part of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative.
The PIF has invested in various companies, including Uber, and has also made substantial investments in the LIV golf league and professional soccer, reflecting its strategy to diversify and enhance its global presence.
UAE’s Mubadala manages $302 billion, while the Abu Dhabi Investment Authority oversees $1 trillion. The Qatar Investment Authority holds $475 billion, and Kuwait’s sovereign fund has surpassed $800 billion, highlighting the substantial financial power of these Middle Eastern sovereign wealth funds.
Abu Dhabi-based MGX earlier in th week partnered with BlackRock, Microsoft, and Global Infrastructure Partners to raise up to $100 billion for AI infrastructure, focusing on data centers and related investments.
MGX was established as a dedicated AI fund in March, with Abu Dhabi’s Mubadala and AI firm G42 as its founding partners.
UAE’s Mubadala has also invested in OpenAI rival Anthropic and is recognized as a highly active venture investor, with eight AI deals over the past four years, according to Pitchbook.
However, Anthropic decided against accepting funding from Saudi investors in its last round, citing national security concerns, sources told CNBC.
However, influx of cash from Middle Eastern sovereign funds is raising concerns among Silicon Valley investors about a potential “SoftBank effect,” reminiscent of Masayoshi Son’s Vision Fund.
SoftBank’s investments in companies like Uber and WeWork led to inflated valuations, with WeWork collapsing into bankruptcy last year after being valued at $47 billion in 2019.
