West Asian sovereign funds pour billions in AI investments

As West Asian countries are splurging billions of dollars into artificial intelligence (AI) start-ups in the recent drastic shift toward technology investment, countries such as Saudi Arabia, United Arab Emirates, Kuwait, and Qatar are trying to diversify their economies by spending a serious amount of their oil earned wealth, to maintain a foothold in the rapidly evolving technology landscape. Investments by state-supported funds have leaped five-fold over the last year, according to Pitchbook.

As a matter of fact, such a trend is already being exemplified in the UAE-based MGX fund, reportedly intending to join OpenAI's last fund-raising round. Such round values OpenAI at about $150 billion; thus it has unveiled quite enormous financial strength being harnessed by these sovereign funds as detailed in a report by CNBC.

Hence, West Asian sovereign wealth funds are emerging as key players in Silicon Valley's AI ecosystem. As long as oil prices continue climbing, these nations can continue to amass more and more wealth, which they can invest heavily in promising AI ventures. "The Gulf Cooperation Council (GCC) nations are likely to surge their combined wealth is expected to rise from $2.7 trillion to $3.5 trillion by 2026," Goldman Sachs forecasts.

Steps taken by funds to fuel growth

The Saudi Public Investment Fund has more than $925 billion in assets and stands out as one of the largest in the world. PIF has invested heavily under Crown Prince Mohammed bin Salman's “Vision 2030”. Among its investments are a substantial stake in Uber and large investments in the LIV golf league and professional soccer.

Further, UAE’s Mubadala has $302 billion under management, and the Abu Dhabi Investment Authority has $1 trillion under management. Qatar Investment Authority has $475 billion, while Kuwait’s fund has topped $800 billion.

There are several strategic steps that these funds have taken recently, for example, MGX recently teamed up with BlackRock, Microsoft, and Global Infrastructure Partners to build AI infrastructure and will be raising as much as $100 billion in data centers and related projects. It was established only this year as an AI-only fund and positions itself to be a market leader through investments in AI in cooperation with its founding partners.

While Mubadala grabbed headlines in making investments in Anthropic, an OpenAI competitor, this proactivity has led Mubadala to conclude eight deals over four years in the AI space. However, such a hurry has sent a significant concern to national security, such that Anthropic reportedly turned away Saudi investors during its recent funding round.

The Saudi PIF also has negotiations ongoing concerning a $40 billion partnership with US-based capital firm Hennessy Capital, and it has also established its own dedicated AI fund named the Saudi Company for Artificial Intelligence or SCAI.

Geopolitical effects

While there are investment opportunities aplenty, the situation is still against a backdrop of geopolitical tension. This remains one of the reasons why Saudi Arabia's human rights record continues to raise red flags for some Western enterprises and startups. The way in whichJamal Khashoggi was assassinated has only brought this into sharp focus.

Despite these problems, even investment in AI is not exclusive to West Asia. Other global players are also on the move; for instance, France's sovereign fund Bpifrance has signed up on 161 AI deals in the last four years while Singapore's Temasek has done 47.

The in-flooding of capital by West Asian funds has opened up a discussion in Silicon Valley among investors about the "SoftBank effect." It is an influence of Masayoshi Son's Vision Fund, which inflated the valuations of companies like Uber and WeWork just before they went public.

Hence, in the context of this development, huge investments by sovereign wealth funds in West Asia in AI startups tend to modify their future economic prospects but also change landscapes in technology globally.

These countries look forward to being considerable contributors to the technology sector as they sail through rather complicated waters of geopolitics with significant financial support and strategic partnerships in many sectors. The coming years will indeed be the testing period as they will keep searching to balance economic diversification with international scrutiny and competition.