Sovereign wealth funds from the Middle East are becoming significant investors in prominent artificial intelligence companies in Silicon Valley. Countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar, rich in oil, are actively seeking to diversify their economies and are increasingly turning to technology investments as a strategic move. Over the past year, funding for AI firms from Middle Eastern sovereign funds has surged fivefold, as reported by Pitchbook. MGX, a new AI fund based in the United Arab Emirates, was reportedly among the investors interested in participating in OpenAI's recent fundraising efforts, according to two sources who spoke to CNBC. This funding round is projected to value OpenAI at $150 billion, as indicated by the anonymous sources due to the sensitive nature of the discussions. While few venture funds have the financial capacity to match the multibillion-dollar investments from major players like Microsoft and Amazon, these sovereign funds can easily allocate substantial amounts for AI ventures. They operate on behalf of their governments, which have benefitted from rising energy prices in recent years. Goldman Sachs anticipates that the total wealth of Gulf Cooperation Council (GCC) countries will increase from $2. 7 trillion to $3. 5 trillion by 2026. The Saudi Public Investment Fund (PIF) has surpassed $925 billion in assets and is actively investing under Crown Prince Mohammed bin Salman's "Vision 2030" initiative. The PIF has stakes in various companies, including Uber, and has made significant investments in the LIV golf league and professional soccer. The UAE's Mubadala manages $302 billion, while the Abu Dhabi Investment Authority oversees $1 trillion. The Qatar Investment Authority has $475 billion in assets, and Kuwait’s fund has exceeded $800 billion. Earlier this week, MGX, based in Abu Dhabi, entered a partnership on AI infrastructure with BlackRock, Microsoft, and Global Infrastructure Partners, aiming to raise up to $100 billion for data centers and other infrastructure projects. Launched this March, MGX serves as a dedicated AI fund with Mubadala and AI firm G42 as its founding partners. Mubadala has also invested in Anthropic, a competitor to OpenAI, making it one of the most active investors in venture capital with eight AI deals in the last four years, according to Pitchbook.

However, Anthropic reportedly ruled out funding from Saudi investors in its most recent round, citing national security concerns. The Saudi PIF is negotiating to establish a $40 billion partnership with U. S. venture capital firm Andreessen Horowitz. Additionally, it launched a dedicated AI fund named the Saudi Company for Artificial Intelligence (SCAI). Nonetheless, Saudi Arabia's human rights record presents challenges for some Western collaborations and startups, highlighted by the international backlash following the alleged killing of Washington Post journalist Jamal Khashoggi in 2018. Investment is not solely concentrated in the Middle East; the French sovereign fund Bpifrance has completed 161 AI and machine learning deals in the past four years, while Singapore's Temasek has finalized 47 deals, according to Pitchbook. Another Singaporean fund, GIC, has made 24 investments. This influx of capital raises concerns among some Silicon Valley investors about a potential "SoftBank effect, " referencing Masayoshi Son’s Vision Fund, which significantly backed companies like Uber and WeWork at inflated valuations prior to their public offerings. WeWork faced bankruptcy last year despite being valued at $47 billion by SoftBank in 2019. For the U. S. , attracting investments from sovereign wealth funds into American firms, rather than into global competitors like China, has become a geopolitical concern. Jared Cohen from the Goldman Sachs Global Institute notes the excessive capital coming from nations like Saudi Arabia and the UAE, coupled with their readiness to invest globally. He referred to these countries as "geopolitical swing states. "