Middle Eastern Sovereign Wealth Funds Pour Billions into AI Startups

Sovereign wealth funds from the Middle East are increasingly becoming key investors in Silicon Valley’s artificial intelligence (AI) startups. Nations like Saudi Arabia, United Arab Emirates (UAE), Kuwait, and Qatar are actively seeking to diversify their economies by turning to technology investments. According to Pitchbook data, funding for AI companies by Middle Eastern sovereign funds has increased fivefold in the last year alone.

The United Arab Emirates recently saw its new AI fund, MGX, attempt to invest in OpenAI’s latest funding round, seeking a piece of the valuation set at $150 billion. This move underscores the strategic shift of oil-rich nations as they position themselves at the forefront of the AI industry. Traditionally focusing on energy, these sovereign funds now serve their governments by investing extensively in AI, capitalizing on recent years of rising energy prices.

Saudi Arabia’s Public Investment Fund (PIF), worth $925 billion, exemplifies this trend. Under Crown Prince Mohammed bin Salman’s “Vision 2030,” the PIF has made substantial investments in technology and other sectors, including companies like Uber and initiatives like the LIV Golf League. The UAE's Mubadala, with $302 billion under management, has also been strongly active in AI investments, notably partnering with firms like Anthropic.

Indeed, other Middle Eastern funds like the Abu Dhabi Investment Authority and the Qatar Investment Authority are heavily involved in AI. In partnership with BlackRock, Microsoft, and Global Infrastructure Partners, the Abu Dhabi-based MGX aims to raise up to $100 billion for AI infrastructure projects, including data centers.

Investments from these Middle Eastern funds do not come without controversy. Saudi Arabia’s human rights record, particularly the alleged killing of journalist Jamal Khashoggi in 2018, has raised concerns among Western partners and startups. Despite such issues, the financial clout these sovereign funds bring means they remain influential players in the global AI landscape.

The enthusiasm for AI is not limited to the Middle East. French sovereign fund Bpifrance and Singaporean funds like Temasek and GIC have also been active in this space. This global rush into AI investments echoes past trends where massive influxes of capital have driven valuations to astronomical levels, reminiscent of SoftBank’s Vision Fund era. This has led to some caution among Silicon Valley investors who recall how such investments previously resulted in inflated valuations for companies like Uber and WeWork.

The geopolitical implications of these investments are significant. For the United States, Middle Eastern sovereign wealth funds investing in American companies is favorable compared to investments going into rival nations like China. Jared Cohen of Goldman Sachs Global Institute highlights the strategic influence of countries like Saudi Arabia and the UAE, describing them as “geopolitical swing states” due to their vast capital reserves and willingness to deploy these funds globally.

Overall, the significant influx of capital from Middle Eastern sovereign funds into AI represents a strategic shift as these nations seek to diversify their economies and secure a foothold in the burgeoning AI sector. This dynamic has profound implications not only for the tech industry but also for global economic and geopolitical landscapes.