Saudi Arabia Plans
$40 Billion Push into Artificial Intelligence
The Middle Eastern country is
creating a gigantic fund to invest in A.I. technology, potentially becoming the
largest player in the hot market.
The
government of Saudi Arabia plans to create a fund of about $40 billion to
invest in artificial intelligence, according to three people briefed on the
plans — the latest sign of the gold rush toward a technology that has already
begun reshaping how people live and work.
In
recent weeks, representatives of Saudi Arabia’s Public Investment Fund have
discussed a potential partnership with Andreessen Horowitz, one of Silicon
Valley’s top venture capital firms, and other financiers, said the people, who
were not authorized to speak publicly. They cautioned that the plans could
still change.
The
planned tech fund would make Saudi Arabia the world’s largest investor in
artificial intelligence. It would also showcase the oil-rich nation’s global
business ambitions as well as its efforts to diversify its economy and
establish itself as a more influential player in geopolitics. The Middle
Eastern nation is pursuing those goals through its sovereign wealth fund, which
has assets of more than $900 billion.
Officials
from the Saudi fund have discussed the role Andreessen Horowitz — already an
active investor in A.I. and whose co-founder Ben Horowitz is friends with the
fund’s governor — could play and how such a fund would work, the people said.
The $40 billion target would dwarf the typical amounts raised by U.S. venture
capital firms and would be eclipsed only by SoftBank, the Japanese conglomerate
that has long been the world’s largest investor in start-ups.
The
Saudi tech fund, which is being put together with the help of Wall Street
banks, will be the latest potential entrant into a field already awash in cash.
The global frenzy around artificial intelligence has pushed up the valuations
of private and public companies as bullish investors race to find or build the
next Nvidia or OpenAI. The start-up Anthropic, for
instance, raised more than $7 billion in one year alone — a flood of money
virtually unheard-of in the venture capital world.
The
cost of funding A.I. projects is steep. Sam Altman, the chief executive of OpenAI, has reportedly sought a huge sum from the United
Arab Emirates government to boost manufacturing of chips needed to power A.I.
technology.
Saudi
representatives have mentioned to potential partners that the country is
looking to back an array of tech start-ups tied to artificial intelligence,
including chip makers and the expensive, expansive data centers
that are increasingly necessary to power the next generation of computing,
according to four people with knowledge of those efforts, who were not authorized
to speak publicly. It has even considered starting its own A.I. companies.
Two
of the people said that Saudi’s new investment push is likely to take off in
the second half of 2024. A $40 billion fund could make both the Saudi Arabian
government and Andreessen Horowitz key players in races to corner various
businesses related to the field.
Mr.
Horowitz and Yasir al-Rumayyan, the governor of the
Public Investment Fund, have discussed the possibility of the Silicon Valley
firm setting up an office in the country’s capital, Riyadh, one person with
knowledge of the conversations said.
Other
venture capitalists may participate in the kingdom’s tech fund, two people
briefed on the plans said.
Partly
because of its enormous financial clout and growing ambitions, those in
international business circles closely monitor moves made by the Public
Investment Fund, which was created in 1971.
In
2018, just as Saudi Arabia was becoming a major destination for investment
firms and entrepreneurs seeking financial backing, the country’s agents killed
the dissident Saudi journalist Jamal Khashoggi in the kingdom’s Istanbul
consulate, which for a spell seemed to damage the nation’s reputation among
international financiers.
In
2022, the Saudi government invested billions into a firm run by former
President Donald J. Trump’s son-in-law Jared Kushner, among others, which was
seen by many as a political move. One of its recent deals to merge its LIV Golf
upstart with the PGA Tour raised the ire of golfers, but the pact is also
controversial in part because of Saudi Arabia’s human rights record.
Saudi
Arabia, which poured $3.5 billion into Uber in 2016, has largely struggled with
technology investing. It handed $45 billion to SoftBank for the Japanese firm’s
$100 billion Vision fund, which was channeled into
dozens of enterprises including the now-bankrupt real estate firm WeWork and
other failed start-ups, such as the robotic pizza-making company Zume.
Many
in Silicon Valley and on Wall Street have welcomed the nation back into the
fold. During this year’s Super Bowl, Mr. Horowitz hosted Mr. al-Rumayyan, according to two people briefed on their
activities.
The
two men also spent time together before and after the game, the people said,
with Mr. Horowitz giving Mr. al-Rumayyan tours of Las
Vegas, his adopted city, and introducing the investor to his friends in music
and sports.