How Microsoft's billion-dollar bet on G42 spotlights the UAE's AI ascension

From continuing investment to increased market listings, the $1.5bn deal is propelling the advanced technology industry forward

Microsoft's $1.5 billion investment in G42 reflects increasing confidence in the Middle East's technology sector, say industry figures. Getty Images

In the aftermath of Microsoft's $1.5 billion investment in Abu Dhabi artificial intelligence and cloud company G42, the spotlight is now on the Middle East's growing stature as a regional leader for global technology.

The charge, led by the UAE and Saudi Arabia, has attracted attention from the likes of Oracle, Google and Amazon and highlights increasing investor confidence in the region, with growing financial backing from, and relations with, the West, considered the home of the world's technology industry leaders.

Less discussed are the trickle-down effects gaining momentum in the UAE, with advanced tech companies seeing marked growth in local stock markets, signifying the expansion of the country's advanced AI industry.

A notable example of the UAE’s AI industry going to the next level is the coming together of Adnoc, G42 and Presight. The trio formed a partnership on Wednesday to accelerate AI solutions for the energy sector.

They also announced a new shareholding structure for AIQ – a joint venture between Adnoc and Group 42, as per which Presight AI, a unit of G42 group focused on data analytics and artificial intelligence, will acquire a 51 per cent stake in AIQ with Adnoc retaining a 49 per cent shareholding.

The deal will see merger of AIQ’s AI energy solutions with Presight's big data analytics, and international markets access to establish AIQ as a top energy-focused AI organisation.

Taking stock

Following the Microsoft deal this month, Bayanat and Presight AI – among the UAE's largest advanced tech companies – surged about 7 per cent and 15 per cent, respectively, mirroring the impact on investor sentiment.

Thomas Pramotedham, chief executive of G42 unit Presight AI, told The National that this is a direct reflection of the tangible and immediate benefits of the partnership.

“We're now able to access the larger Microsoft [ecosystem] in AI and cloud computing,” he said. This gives access to the company's talent, including high-skilled developers, and allows his company to expand its sectors and verticals.

“We're able to take that [investment] into solutions that can be applied to economies around us,” Mr Pramotedham said, noting that sectors such as government services, finance, energy, agriculture and security will benefit the most.

Hasan Al Hosani, chief executive of G42 geospatial technology arm Bayanat, said in addition to access to instrumental resources for transformation, the partnership is also injecting essential capital and, more importantly, trust.

“That's a vote of confidence … [that] has inspired investors to look at UAE companies, both on the public market and those that are privately held,” he said.

Thomas Pramotedham, chief executive of Presight AI, and Hasan Al Hosani, chief executive of Banayat. Photos: Presight / Leslie Pableo for The National

Bayanat will now be able to focus more on expanding its technological capabilities. Specifically with Microsoft, Bayanat will be able to “build on top of Microsoft's [expertise] to better infuse AI capabilities” to enhance its geospatial and mobility solutions that can be used for tracking all types of motion from more traditional weather maps and traffic and accident data, but also in agriculture to measure crop yields and quality.

Investment flows

Overall investments into Middle East tech have grown in recent years. For instance, cloud and data centres have sprouted in the region thanks to backing from global companies including Oracle, Microsoft, Amazon, IBM and Alibaba Cloud.

In February 2023, Microsoft announced its aim to establish a new data centre in Saudi Arabia offering organisations in the kingdom local data residency and faster access to the cloud and advanced security solutions.

The following month, Alibaba Cloud, a subsidiary of the China tech major, extended its partnership with Dubai Holding by upgrading its data centres.

The regional investment trend continues, with Chinese peer Tencent Holdings planning to boost its cloud services in the UAE and Saudi Arabia, a senior executive told Bloomberg last month.

Attracting such investments was part of the UAE's AI strategy revealed in October 2017 with the goal integrating smart digital solutions to overcome challenges across sectors from health and education to transport and space.

The blueprint also included the creation and expansion of home-grown AI funds and leading companies.

Bayanat, founded in 2008, and Presight AI, founded in 2020, made their debuts on the Abu Dhabi Securities Exchange in October 2022 and March 2023, respectively.

Bayanat raised $171 million, part of 20 IPOs in the Middle East and North Africa that raised about $7.3 billion during the fourth quarter of 2022, data from London-based consultancy EY showed.

That is up from 13 IPOs and $5.6 billion raised in the same period of 2021 and practically on par with 2021's total of 21 IPOs and $7.9 billion raised, EY said.

Presight AI, on the other hand, raised $496 million, which was among the 10 Mena IPOs that raised approximately $3.4 billion – $2.5 billion alone from Abu Dhabi's Adnoc Gas – in the first quarter of 2023, EY said.

That formed part of a bumper year for IPOs on the ADX, which welcomed Pure Health Holding ($986 million raised), Investcorp Capital ($451 million), blockchain and crypto firm Phoenix Group ($371 million) and Adnoc L&S ($769.5 million).

Bayanat's Mr Al Hosani believes more technology-centric companies will list on UAE stock markets. But the path has been paved and the chips – figuratively and technologically speaking – are falling into place.

Future market

The UAE is on a trajectory to be a global AI leader, but, along with the rest of the Middle East, it still has room to grow compared to other regions.

The top 50 venture capital funds that invest in AI in the Middle East have a combined 502 investments, compared to Asia's 786, Europe's 1,227 and the US's 2,298, according to start-up tracking platform Shizune.

Amro Zakaria Abdu, a global financial markets strategist based in the UAE, said the Emirates' potential for global prominence is a gold mine for those who want a slice of the region's market growth down the line.

“This is key as whomever can get a head start in this area will likely compound their leadership in the economy of the future,” he said. Some are already taking advantage.

Since 2013, China has been considered the primary investor in the Middle East economic and AI sector, according to a 2020 report by the Washington Institute.

China and the UAE signed a memorandum of understanding in 2015 that paved the way for multiple high-level education partnerships.

In 2019, China AI giant SenseTime signed a deal with Abu Dhabi to base its regional research and development headquarters in the emirate, to create hundreds of jobs, including for high-skilled engineers.

“China has gotten ahead in technology partnership, particularly in telecommunication and the G5 networks in the region,” said Mr Zakaria. That trend is starting to shift with recent US deals, signalled by Microsoft's $1.5 billion commitment.

“The partnership aligns with the US strategy to counter China's influence in the region's technology sector,” he added, which is also evident from other recent developments.

In February, Sam Altman, chief executive of generative AI platform ChatGPT maker OpenAI, was said to be in talks with investors, including the UAE government, to raise funds – reportedly to be as much as $7 trillion – aimed at boosting the world’s chip-building capacity to power AI, The Wall Street Journal reported.

Last August, the UAE and Saudi Arabia bought thousands of AI chips from market leader Nvidia, as the Arab world's two biggest economies expanded their AI strategies, the Financial Times reported.

These developments, along with the aforementioned rise in Mena AI funding activities, are all part of a global rush: AI investments spiked to $93.5 billion in 2021, nearly doubling from $48.2 billion in 2020, and are expected to steadily rise and hit $200 billion by 2025, data from Goldman Sachs had shown.

And it's not just the stock market: Presight AI's Mr Pramotedham noted the number of private equity firms that have set up shop at Abu Dhabi Global Market, the emirate's financial hub, which “tell[s] you that this is where the source of the next capital bulls would be”.

“So, yes, you would definitely see EU and more American funds coming into Abu Dhabi,” he added, like the $27 million commitment from the European Investment Bank to Dubai-based Middle East Venture Partners in February last year, aimed at supporting start-ups in all sectors – AI included.

New entrants

While the recent surge in US interest and investment in the UAE is building up G42's leading AI companies, it is also boosting the country's ecosystem enabling budding technology companies to flourish.

“Investments have helped us to significantly enhance our infrastructure, which is critical in AI … it has led to tremendous efficiencies as well,” Avneesh Prakash, chief executive of Dubai-based voice translating and dubbing AI start-up Camb.ai, told The National.

The start-up which gained attention for live-translating a press conference of tennis world No 1 Novak Djokovic at this year's Australian Open, has been able to boost its talent pool, which now “comprises top-tier scientists from leading institutions around the world, including Carnegie Mellon University”, Mr Prakash said.

Alistair Pernigo, co-founder and chief technology officer of digital olfaction start-up Auralink, said the UAE ecosystem's reputation is allowing his company to gain credibility.

A key difficulty of advanced tech start-ups is proving that their innovative solutions are realistic and viable, so the UAE's rising reputation in the global tech world is gradually helping in “overcoming the traditional scepticism associated with early-stage tech adoption”, he argued.

This is exemplified by new firms that have won major contracts and put them on the radar, said Lara Hussein, co-founder and chief executive of The Waste Lab, a Dubai-based start-up that recycles food scraps.

“We won projects for the Dubai World Trade Centre and Expo City Dubai, our biggest yet to be signed … investments have helped our sales, negotiations and all the back-and-forth where you need a strong workforce,” she said.

The right time

Microsoft's investment in G42, which will further boost the latter's global expansion plans, includes the creation of a $1 billion fund to support developers that is aimed at enhancing the Middle East's technology talent pool – a key component that can help the UAE become a global AI hub.

This investment “will foster the development of the skilled and diverse AI workforce that drives digital transformation and competitiveness in the country”, said Bayanat's Mr Al Hosani.

Peng Xiao, group chief executive of G42, and Satya Nadella, executive chairman and chief executive of Microsoft, in Abu Dhabi in November 2023. Victor Besa / The National

Abu Dhabi has been touting its infrastructure, market, talent and regulatory advantages as an incentive for foreign assets.

“The Microsoft deal is the first deal of that magnitude with a US company, underscoring three major points,” Irina Tsukerman, a New York-based geopolitical analyst, told The National.

These are “the perceived growing importance of AI in technical collaborations, the potential of the Middle East in terms of human capital in innovation and transformative breakthrough, and the view of the UAE as a pivotal and growing player in the region”.

Following the deal with Microsoft, G42 attracted another key US tech player: on April 22, it announced that it had entered into a collaboration with chipmaker Qualcomm Technologies to bring Qualcomm Cloud AI 100 solutions to the market through the Condor AI platform of Core42.

“Middle Eastern states are winners as they are facing bigger countries courting their attention with investments and opportunities,” Ms Tsukerman said.

“This, in turn, holds a promise to transform the region from passive recipients of foreign innovation to doers and active contributors,” she said. This is an opportunity that is likely to turn the Middle East into an international hub of technological breakthroughs, she adds.