AI Startups Turn to UAE and Saudi Arabia for Funding

Gulf States Invest Heavily in Silicon Valley AI Projects

by Faruk Imamovic
SHARE
AI Startups Turn to UAE and Saudi Arabia for Funding
© Getty Images/Warren Little

Today, like many Silicon Valley leaders, the artificial intelligence entrepreneur has been wooed by the allure of Middle Eastern partnership and funding. Andrew Feldman’s company, Cerebras, is now leveraging millions from the oil-rich UAE to build advanced supercomputer data centers in Stockton, Dallas, and on the outskirts of the Emirati desert city.

This shift marks a significant change in the dynamics of global technology development. Feldman is among a new wave of tech founders and investors who are quietly gravitating towards the sovereign wealth funds of the Gulf states, pursuing deals with these authoritarian regimes. Microsoft recently announced a $1.5 billion investment in G42, the UAE’s flagship tech firm, which also uses AI language models from Sam Altman’s OpenAI. Moreover, Andreessen Horowitz, a prominent venture capital firm, is in talks to raise $40 billion from Saudi Arabia for a dedicated AI fund.

Shifting Sands in the Tech Industry

The cutthroat and costly ambition driving the AI arms race is leading to a seismic shift in the region’s prominence. According to interviews with more than two dozen investors, tech company executives, and government officials, this shift is changing how advanced technologies are built and who stands to benefit.

Historically, some tech entrepreneurs and venture firms avoided Middle Eastern funding due to concerns about human rights abuses, the region’s ties to China, and a general disdain for what was once considered unsophisticated investment, often labeled as “dumb money” from oil states. The 2018 killing of Saudi journalist and Washington Post contributor Jamal Khashoggi caused many firms to explicitly distance themselves from the country’s cash. However, Middle Eastern money has quickly become one of the most powerful geopolitical forces in the tech industry. “The Khashoggi era is over,” remarked a prominent venture capitalist.

“Everyone I talk to is either going to or coming back from the UAE — the same way we used to swing by Sand Hill Road,” said Feldman, referring to the street that’s home to Silicon Valley’s storied venture capital firms. Feldman plans to visit Saudi Arabia later this year.

The U.S. Influence

Washington is also playing a pivotal role in steering this shift, using the tech industry to push the region away from China’s influence. The UAE, a key U.S. security partner, is central to these efforts. Last June, the White House hosted executives from firms including Microsoft, Google, and OpenAI for a meet-and-greet with Tahnoun bin Zayed al Nahyan, the UAE’s national security adviser. In this meeting, the sheikh expressed the wealthy Gulf state's openness to partnering with leading American tech firms, aiming to displace Chinese technology companies that have long been involved in the region.

Some Silicon Valley companies have personal backchannels with U.S. officials. For instance, OpenAI CEO Sam Altman, who has made several fundraising trips to the UAE, is reportedly on a text message thread with Commerce Secretary Gina Raimondo. “AI is the new frontier for everything, including geopolitical power,” said Venky Ganesan, a partner at Menlo Ventures.

Abu Dhabi
Abu Dhabi© Getty Images/Warren Little
 

Middle East’s Tech Ambitions

The Middle East’s pivot to AI is part of a broader strategy to lessen economic dependence on oil, for which global demand is projected to peak this decade. With Cerebras’s technology, G42 is developing what could become the world’s most advanced Arabic large language model, enabling AI software to fluently converse in a language spoken by about 400 million people.

However, the burgeoning tech partnership is not without controversy. Some tech executives and security researchers caution against collaborating with countries that have a history of human rights abuses and that might use American technologies for surveillance, including targeting U.S. citizens. “The problem is, where do each of those chips end up once you sell them,” said an investor involved in Middle East-U.S. deals. “That’s not always something you can control.”

The Global AI Arms Race

Rising global powers have been investing in Silicon Valley for the past decade, often avoiding questions about national security risks. During a period of openness from the Chinese government in the 2010s, national giants like Alibaba and Tencent made significant investments in U.S. start-ups, while American investors poured billions into TikTok parent ByteDance. The degree of Chinese government control loomed over these deals, but entrepreneurs eager to access the billion-person consumer market in China rarely asked tough questions.

The Middle East entered the tech scene through a side door. Tens of billions from Saudi Arabia and UAE sovereign wealth firms enabled the Japanese conglomerate SoftBank to launch the $100 billion Vision Fund in 2017, the largest single fund in tech history. Mohammed bin Salman Al Saud, the crown prince of Saudi Arabia, known as MBS, made his presence known in Silicon Valley by dining with investors Peter Thiel, Marc Andreessen, and Altman, even renting the entire Four Seasons Hotel.

The Vision Fund showered start-ups such as Uber and WeWork with so much cash it fueled a new category of elite start-up unicorns, dubbed 10-headed “decacorns.” This competition forced Sand Hill Road firms, whose funds rarely topped $1 billion, to embark on their own multibillion-dollar fundraising efforts. Collectively, UAE and Saudi sovereign wealth funds now manage more than $2 trillion in capital.

Saudi Arabia Silicon Valley
SHARE