Microsoft invests $1.5 billion in UAE G42 and will get board seat

(Bloomberg) — Microsoft Corp. will invest US$1.5 billion in the UAE’s leading artificial intelligence company, G42, reinforcing the Abu Dhabi-based company’s commitment to reducing its presence in China.

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As part of the deal, 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 CEO Peng Xiao said in an interview.

“Microsoft has received strong encouragement from the US government to move forward in this process,” said Smith. “This 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 to truly be at the forefront of not just the technology itself, but of world-leading companies. safety and security and responsible AI standards.”

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

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

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

Read more: Saudi Arabia and UAE race to build data centers in race to beat AI

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

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This comes after a top US lawmaker urged the Commerce Department to consider trade restrictions on the company due to its ties to Beijing, following allegations made in a New York Times story. G42 denied the report and said the company “has been pursuing a business strategy since 2022 to fully align with our US partners and not engage with Chinese companies.”

This shift came in the context of a broader U.S. backlash against entities seen as having close ties to Beijing. Officials in President Joseph Biden’s office were looking at 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 joining the Gulf company as part of an expansion in the UAE and the wider region. San Francisco-based OpenAI — whose biggest investor is Microsoft — has held discussions with G42 to raise funds for a new chip venture, Bloomberg reported last year, but the current status of those talks is unclear.

G42 is not looking for more investment, but rather additional partnerships, Xiao said. “Through this anchor relationship with Microsoft, we will be able to work with many more global partners in the domain of AI and cloud computing.”

–With assistance from Mackenzie Hawkins.

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