Middle Eastern sovereign wealth funds are emerging as key financiers of artificial intelligence advocates in Silicon Valley.

Oil-rich nations such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar are trying to diversify their economies and are turning to technology investment as an alternative. In the past year, funding of AI companies from Middle Eastern countries has increased fivefold, according to data from Pitchbook.

MGX, a new United Arab Emirates AI investment fund, was among investors eyeing a piece of OpenAI’s fundraising pie last week, according to 2 CNBC sources. The investment round values ​​OpenAI at $150 billion, according to the same sources.

Few venture funds have “deep enough pockets” to compete with the multibillion-dollar checks coming from companies like Microsoft
and Amazon. But these sovereign wealth funds have no problem finding cash for AI deals. They are investing on behalf of their governments, which have been helped by rising energy prices in recent years. The combined wealth of the Gulf Cooperation Council, or GCC, countries is expected to grow from $2.7 trillion to $3.5 trillion by 2026, according to Goldman Sachs.

Saudi Arabia’s Public Investment Fund, or PIF, has topped $925 billion and is on an “investment spree” under Crown Prince Mohammed bin Salman’s “Vision 2030” initiative. The PIF has invested in companies including Uber, while also spending heavily on the LIV golf league and professional soccer.

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

Earlier this week, Abu Dhabi-based MGX entered into an AI infrastructure partnership with BlackRock, Microsoft
and Global Infrastructure Partners, aiming to raise up to $100 billion for data center and other infrastructure investments. MGX launched as a dedicated AI fund in March, with Abu Dhabi’s Mubadala and AI firm G42 as founding partners.

Mubadala of the United Arab Emirates has also invested in OpenAI competitor Anthropic, and is among the most active venture investors, with eight AI deals in the past four years, according to Pitchbook. Anthropic ruled out taking money from the Saudis in the latest round of funding, citing national security, sources told CNBC.

Saudi Arabia’s PIF is in talks to form a $40 billion partnership with US venture capital firm Andreessen Horowitz. He also created a special artificial intelligence fund called the Saudi Company for Artificial Intelligence or SCAI.

It is also a matter of human rights

However, the kingdom’s human rights record remains an issue for some Western partners and business start-ups. The most notable case in recent years was the alleged assassination of Washington Post journalist Jamal Khashoggi in 2018, an event that sparked an international backlash in the business community.

Concern about a SoftBank effect

It’s not just the Middle East that’s betting money on space. French sovereign fund Bpifrance has signed 161 AI and machine learning deals in the past four years, while Singapore’s Temasek has completed 47, according to Pitchbook. GIC, another Singapore-backed fund, has completed 24 deals.

The “flood” of cash has some Silicon Valley investors worried about a SoftBank phenomenon, citing Masayoshi Son’s Vision Fund. SoftBank specifically backed Uber and WeWork, pushing the companies to high valuations before they went public. WeWork went bankrupt last year after being valued by SoftBank at $47 billion in 2019.

For the US, investing sovereign wealth funds in US companies rather than global rivals such as China was a geopolitical priority. Jared Cohen of the Goldman Sachs Global Institute said there is 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 characterized them as “geopolitically floating states”.