Microsoft invests $1.5 billion in UAE’s top artificial intelligence firm G42, gets board seat

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Microsoft Corp. will invest $1.5 billion in the United Arab Emirates’ top artificial intelligence firm, G42, bolstering the Abu Dhabi-based company’s commitment to scale back its presence in China.

As part of the accord, Microsoft President Brad Smith will join G42’s board, and G42 will use the US software maker’s Azure cloud for its AI applications. The agreement, an expansion of an existing partnership between the two companies, was developed in consultation with the UAE and US governments, Smith and G42 Chief Executive Officer Peng Xiao said in an interview.

“Microsoft got strong encouragement from the US government to move forward in this process,” Smith said. “That reflects a recognition by the US government of the importance of the relationship between the two countries and the importance of continuing to encourage responsible companies like G42 and Microsoft really be at the forefront, not only of the technology itself, but of world-leading security and safety and responsible AI standards.”

The partnership follows behind-the-scenes negotiations between the US government and the Middle Eastern firm, in which G42 agreed to divest from China and pivot to American technology. G42 held talks with the US Commerce Department’s Bureau of Industry and Security and came to an understanding last year, according to people familiar with the discussions. Under the arrangement, G42 agreed to pare back its presence in China or face potentially punitive measures from Washington, they said.

G42, which has been a leader in the UAE’s push into AI, has businesses spanning everything from cloud computing to driverless cars. It’s part of the $1.5 trillion empire of UAE 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 would spend on Microsoft’s cloud services. Redmond, Washington-based Microsoft and G42 will also set up a $1 billion fund for developers.

In a later stage of the deal, Microsoft will host some of its own applications in G42’s data centres and use the relationship as a way to reach customers in Africa and Central Asia, Smith said.

“There are markets today where Microsoft and really no American technology company has a real data centre presence,” he said. “This is the kind of partnership that can really bring the cloud and AI to the global south probably a decade faster than would otherwise be the case.”

The investment agreement, signed when Smith visited Abu Dhabi earlier this month, is the product of a year’s worth of talks that included coordination with government officials in both countries. In February, G42’s Xiao said in an interview that the company would reduce its presence in China, and pledged to invest in key Western markets.

That came after a key US lawmaker urged the Commerce Department to consider trade restrictions on the firm over its ties to Beijing, following allegations made in a New York Times story. G42 denied the report, and said the company has “pursued a commercial strategy since 2022 to fully align with our US partners and not to engage with Chinese companies.”

That pivot came against the backdrop of broader US pushback on entities perceived to have close ties with Beijing. Officials in President Joseph Biden’s cabinet were reviewing more than half a dozen acquisitions, people familiar with the matter said last year, including deals from Mubadala Investment Co., which owns a stake in G42.

G42’s partnerships include one with artificial intelligence developer OpenAI, creator of ChatGPT, which is teaming up with the Gulf firm as part of an expansion within the UAE and the broader region. San Francisco-based OpenAI — whose biggest investor is Microsoft — has held discussions with G42 to raise funding for a new chip venture, Bloomberg reported last year, but the current status of those talks is unclear.

G42 isn’t looking for more investments, but it is seeking additional partnerships, Xiao said. “Through this anchor relationship with Microsoft, we will be able to work with a lot more global partners in the AI and cloud-computing domain.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow