Artificial Intelligence

Microsoft to invest $1.5bn in UAE artificial intelligence company G42

The deal aims to free the partner from pre-existing ties with China

16 April 2024

Gemma, Sora e le altre (Ai). Lezione 18 di intelligenza artificiale generativa

3' min read

Key points

A deal with government placet
Billion-dollar fund for developers
Bringing Ai and cloud to the global south
Getting out of China
Use participations under the lens
The role of OpenAi

3' min read

Microsoft will invest $1.5 billion in G42, the UAE's leading artificial intelligence company, reinforcing the Abu Dhabi-based company's commitment to reduce its presence in China. As part of the deal, Microsoft president Brad Smith will join the board of G42, which will use the US software maker's Azure cloud for its artificial intelligence applications. Smith and G42 CEO Peng Xiao said in an interview that the deal, an expansion of an existing partnership between the two companies, was developed in consultation with the UAE and US governments.

A deal with the governments' placet

"Microsoft has received strong encouragement from the US government to move forward in this process," Smith said. "This reflects the US government's recognition of the importance of the relationship between the two countries and the importance of continuing to encourage responsible companies like G42 and Microsoft to really lead the way, not only in terms of the technology itself, but also in terms of safety and security standards and globally responsible Ai."

Billion-dollar fund for developers

G42, which has been a leader in the UAE's push towards Ai, has businesses ranging from cloud computing to driverless cars. It is part of the $1.5 trillion empire of the UAE's national security adviser Sheikh Tahnoon bin Zayed Al Nahyan. The investment gives Microsoft a minority stake in G42, said Xiao, who declined to disclose financial terms or say how much G42 will spend on the Washington state company's cloud services. Microsoft and G42 will also create a $1 billion fund for developers.

Bringing Ai and Cloud to the Global South

At a later stage of the agreement, Microsoft will host some of its own applications in G42's data centres and use the relationship as a means to reach customers in Africa and Central Asia, Smith said. "There are markets today where Microsoft and no US technology company has a true data centre presence," the manager said. "This is the kind of partnership that can really bring cloud and artificial intelligence to the global south probably a decade sooner than would otherwise be the case."

Read more: Saudi Arabia and the United Arab Emirates rush to build data centres in the race for AI

Getting out of China

The investment agreement, signed during Smith's visit to Abu Dhabi earlier this month, is the product of a year of talks that included coordination with government officials in both countries. In February, G42's Xiao had stated in an interview that the company would reduce its presence in China and commit to investing in major Western markets. This came after US lawmakers urged the Commerce Department to consider trade restrictions against the company for its ties to Beijing, following allegations in a New York Times article. G42 denied the news and stated that the company 'has pursued a business strategy since 2022 to fully align with US partners and not engage with Chinese companies'.

U.S. participations under the lens

This turn of events came in the context of a broader US reaction to entities perceived to have close ties to Beijing. President Joseph Biden's cabinet officials were reviewing more than half a dozen acquisitions, according to people familiar with the matter last year, including the operations of Mubadala Investment, which holds a stake in G42.

The role of OpenAi

Among G42's partnerships is one with artificial intelligence developer OpenAI, creator of ChatGPT, which is collaborating with the Gulf company as part of an expansion in the United Arab Emirates and across the region. San Francisco-based OpenAi, whose main investor is Microsoft, has been in discussions with G42 to raise funds for a new chip venture, as Bloomberg reported last year, but the current status of those talks is unclear. G42 is not looking for further investment, but for new partnerships, Xiao said. "Through this anchor relationship with Microsoft, we will be able to work with many more global partners in Ai and cloud-computing."