At a February investment meeting in Miami, the head of Saudi Arabia’s Public Investment Fund, Yasir al-Rumayyan, reinforced the kingdom’s ambitions to become a global force in artificial intelligence. Rumayyan suggested that his country is “fairly well positioned to be an AI hub outside of the U.S.,” citing abundant energy resources and political will as important conditions for AI development. Beyond enabling conditions, Gulf sovereign wealth funds and subsidiary companies themselves are playing an increasingly assertive role in the development and deployment of AI and other advanced technologies. New York Times technology correspondents suggest Saudi government ambitions surrounding AI have “the potential to create a new power center in the global tech industry.” Meanwhile, the Emiratis have been rapidly expanding Abu Dhabi-based G42, a Mubadala-backed tech holding company, since its creation in 2018.
These efforts are not just garnering global attention but also – in some cases – paying off. On April 15, Microsoft announced a $1.5 billion strategic investment in G42 for a minority stake and Microsoft’s vice chair and president, Brad Smith, joining the Emirati company’s board. At Saudi Arabia’s annual tech-focused LEAP conference, Amazon Web Services announced plans to spend $5.3 billion to create a new infrastructure region in the kingdom. Gulf countries are racing to build data centers with the help of local, Asian, and Western companies. OpenAI CEO Sam Altman’s latest tech bid to boost the world’s chip-building capacity, which may require raising trillions of dollars, led him to the United Arab Emirates, where he met with prominent officials and investors. Such tech partnerships and initiatives require deep pools of investment capital and long investment horizons.
Beyond Digitization and Equities
The intensifying tech focus of Gulf sovereign wealth funds builds upon deeper foundations. Regional governments have advanced digitization efforts for many years, with a more recent focus on building robust digital economies. The coronavirus pandemic accelerated efforts to integrate technology across policymaking processes to improve efficiency and resilience. A tech thread likewise weaves through the interrelated roles of sovereign wealth funds in the region: earning strong returns, supporting economic diversification efforts, and (for some funds) prioritizing domestic development initiatives or investing in international assets with clear domestic benefits.
Gulf sovereign wealth funds will continue to invest in promising tech-focused firms and startups. However, regional governments overseeing some of the world’s largest sovereign wealth funds no longer seem content simply generating financial returns at the margins of the tech sector. State-owned wealth vehicles are increasingly underpinning ambitious plans to reposition Gulf countries as global tech hubs. Sovereign wealth funds themselves and their subsidiary companies are becoming increasingly assertive actors in the global tech sector. This development is part of a broader shift in how and where regional sovereign wealth funds, especially in Saudi Arabia and the UAE, are prioritizing investments and investing capital. The changing scope and scale of sovereign wealth funds’ tech-focused investment initiatives not only impacts domestic development trajectories in the Gulf but also has global implications.
Saudi Arabia and the UAE Take the Lead
Already the primary financial engine behind Saudi Vision 2030, the PIF has been playing a more assertive, tech-focused role. The PIF reportedly engaged in early talks with venture capital firm Andreessen Horowitz to partner on a new $40 billion tech fund – an initiative intended to position Saudi Arabia at the forefront of AI investments. In February, Crown Prince Mohammed bin Salman launched Alat, a PIF-owned company, to advance the objective of making Saudi Arabia a global hub for electronics and advanced industries. The new firm quickly announced deals with SoftBank Group and the Chinese surveillance equipment maker Dahua Technology to help build an AI-powered manufacturing industry. The PIF-owned gigaprojects, such as Neom and New Murabba, showcase strong technology dimensions in their marketed offerings. Tonomous, the first subsidiary company of Neom, wants to “build a future fueled by the power of cognitive technology.”
The Saudi sovereign wealth fund is increasingly involved in the infrastructure and supply chains needed to support tech-focused sectors and industries. In April, the PIF agreed to purchase a 51% stake in Telecommunication Towers Company Limited from stc Group as part of a deal to create a merged entity that will function as one of the world’s largest tower companies. A PIF official described the agreements as “a major stride towards a more interconnected digital future.” In 2023, the PIF and the Saudi Arabian Mining Company established Manara Minerals to invest in global companies “driving production of future-facing minerals,” with a focus on copper, lithium, nickel, and iron ore.
The PIF’s latest tech-focused investments and initiatives will ultimately increase the financing obligations of a fast-expanding fund. The Saudi sovereign wealth fund’s invested capital exceeded $30 billion in 2023, making it the highest-spending sovereign wealth fund in the world that year, despite declining levels of cash. An eventual prioritization and sequencing of tech investment initiatives under the Saudi sovereign wealth fund’s expansive umbrella is likely – much in the way that planners at Neom appear to have reassessed targets and deadlines for The Line.
The UAE possesses an intricate web of sovereign wealth funds and government-related entities advancing major tech-focused initiatives. Much of this activity is in Abu Dhabi and within the expansive orbit of National Security Advisor Tahnoun bin Zayed al-Nahyan. The Mubadala-backed G42 is a key player in the UAE’s technology domain, and Tahnoun serves as the company’s chairman. In 2022, G42 launched a $10 billion tech fund in partnership with the Abu Dhabi Growth Fund – a subsidiary of ADQ, another Emirati sovereign wealth fund with Tahnoun at the helm.
The Artificial Intelligence and Advanced Technology Council, which UAE President Mohammed bin Zayed al-Nahyan established in January, created technology investment company MGX in March. MGX aims “to enable the advancement and deployment of leading edge technologies,” and Mubadala and G42 serve as foundational partners for the new company. During the World Governments Summit 2024 in Dubai, the CEO and managing director of Mubadala indicated his sovereign wealth fund would invest significantly more capital into AI and space technology in 2024. With several sovereign wealth funds and roughly $1.5 trillion in assets under management held by just three Abu Dhabi funds, the UAE is in a strong position to shape the trajectory of the Gulf sovereign wealth fund-global tech nexus.
Other Gulf States Work the Margins
The Gulf states of Oman and Bahrain oversee smaller sovereign wealth holdings, which ultimately constrain their ability to operate as influential players in the global tech sector. However, sovereign wealth funds in these countries are seeking to harness the domestic potential of investments in strategic sectors like tech, often in partnership with larger neighboring sovereign wealth funds. Following a state visit by Omani Sultan Haitham bin Tariq to the UAE in April, the Oman Investment Authority and ADQ launched a $180 million tech fund. Oman possesses an older fund of comparable size, the Oman Technology Fund, that aims “to make Oman the preferred destination for the emerging tech companies in the region.” Meanwhile Bahrain’s Mumtalakat provides support to local startups, and its portfolio includes Beyon – the parent company of Batelco – that plans to transform from “a telco-focused company to a technology powerhouse,” according to the sovereign wealth fund’s 2022 annual report. In March, Mumtalakat and the PIF signed an agreement over investment cooperation in strategic sectors.
The wealthier Gulf states of Qatar and Kuwait offer a mixed bag concerning their involvement in the emerging sovereign wealth fund-global tech nexus. The Qatar Investment Authority is in the process of launching a $1 billion fund of funds program with “a priority focus on the tech sector.” Kuwait enjoys massive sovereign wealth holdings, and reports indicate that officials are exploring the launch of subsidiary funds with a greater domestic development focus, which could involve a more active role in the tech domain. However, a more active Kuwaiti sovereign wealth fund-backed role in the global tech sector remains a distant prospect. Political constraints on decision making are likely to prevent major changes in the Kuwait Investment Authority’s investment strategy over the short term. Nevertheless, both Qatari and Kuwaiti sovereign wealth funds have the financial weight to – in theory – make bigger splashes in the tech sector, in line with recent moves by the Saudis and Emiratis.
International firms and investors are keen to capitalize on the ambitious tech plans underway in the Gulf. Meanwhile, U.S. government officials fret about the national security implications of tech-focused cooperation between Gulf countries and strategic competitors. If history serves as an accurate guide, then most sovereign wealth fund investments will continue to flow into and through U.S., European, and Middle Eastern assets and partnerships. Indeed, the UAE ambassador to the United States used the occasion of the Microsoft-G42 deal to argue that “the US and UAE will be partners at the leading edge of advanced computing technologies.”
Some investment streams, however, will flow toward strategic competitors of the United States – namely China. A narrow subset of these investments will require continual monitoring and analysis, given the sensitivities involved. However, as the Gulf sovereign wealth fund-global tech nexus makes clear, U.S.-China strategic competition is not the only lens through which to understand tech trends in the Gulf region.
Robert Mogielnicki is preparing an edited book on the political economy of sovereign wealth funds in the Middle East and Asia for Palgrave Macmillan along with several contributors.
