Microsoft Invests in Arab AI Despite Controversy

Written by Camilla Jessen

Apr.16 - 2024 11:12 AM CET

Microsoft's strategic investment in G42, an AI company based in Abu Dhabi, raises eyebrows.

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Microsoft has announced a $1.5 billion investment in G42, an AI company based in Abu Dhabi that is working on developing a supercomputer and has raised eyebrows due to its close ties to China.

As part of the investment, Brad Smith, president of Microsoft, will join the board of G42. The UAE company will also adopt Microsoft’s Azure cloud to power its AI applications.

Controversial Ties

In an interview, Smith alongside G42 CEO Peng Xiao revealed that the collaboration was encouraged by both the U.S. and UAE governments: "Microsoft has been encouraged by the U.S. government to move forward with this process,” said Smith, according to German Handelsblatt.

The investment has a significant political backdrop.

Early in the year, US regulators urged the Commerce Department to consider sanctions against G42 due to its connections with China, as reported by the New York Times. Concerns were raised about the potential for G42 to funnel critical U.S. technology to Beijing, an allegation G42 has denied.

Further scrutiny came from U.S. Cabinet officials who reviewed multiple transactions, including those involving Arab investment firm Mubadala, a key G42 investor.

Expanding Microsoft’s Reach

G42 specializes in a range of artificial intelligence applications, from cloud computing to autonomous vehicles.

The firm is a key asset in the $1.5 trillion portfolio of Sheikh Tahnoon bin Zayed Al Nahyan, the UAE's national security adviser, and collaborates with OpenAI, developers of ChatGPT. This new investment will grant Microsoft a minority stake in G42, although financial specifics beyond this were not disclosed by either party.

Microsoft aims to expand its reach into emerging markets through this partnership. The company plans to host some of its applications in G42’s data centers to serve customers in Africa and Central Asia.

"There are markets today where neither Microsoft nor any other American technology company has a real data center presence,” Smith noted. "This partnership will likely accelerate cloud and AI services to the Global South by at least a decade."

Smith’s visit to Abu Dhabi earlier this month marked the culmination of a year’s negotiations. In February, G42’s Xiao indicated a strategic pivot from China towards Western markets in an effort to diversify its investments.

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