Middle East investment funds have the potential to become global players in the booming artificial intelligence space, given their vigorous push in the advanced technology sector, according to experts.
International investors are particularly taking notice as the region targets untapped markets, clarifies government policies to create advanced tech-friendly environments and integrate AI into all aspects of the private and public sector, industry experts say.
Consultancy PwC had estimated the region’s future slice of the world’s AI market at 2 per cent – $320 billion – by 2030.
Yet this was predicted about six years ago, before the region attracted billions and sealed partnerships with major western tech leaders such as Oracle and Amazon. Most recently, in April, Microsoft entered a $1.5 investment and partnership with the UAE’s leading AI entity G42.
The UAE and Saudi Arabia are at the forefront, as the Arab world's two biggest economies that have focused on diverting away from oil and gas reliance, in pursuit of being recognised as global hubs for tech entrepreneurship and innovation. Global corporations seeking to tap into the region’s anticipated future influence are acting on the offerings.
“Compared to global counterparts, Middle Eastern AI funds are still nascent … [but] the growth is expected to be significant,” Mohammed Soliman, director of the strategic technologies and cybersecurity programme at the Washington-based Middle East Institute think tank, told The National.
He said that “the region offers a compelling case for AI investors”, as “governments are actively supporting AI development through funds and initiatives”.
This is shifting the gaze of global tech heads who are looking to connect to the Middle East and further, said Mr Soliman.
Score board
Regional funds are mostly sector agnostic, yet targeting high-growth industries that are expected to have major implications on their economies.
The top 50 VC funds that invest in AI in the Middle East have a combined 502 investments, according to start-up tracking platform Shizune. Israel dominates the list with 29 funds.
Saudi Arabia is second with six VC funds – Raed Ventures, Saudi Aramco's Wa'ed Ventures, Vision Ventures, Impact46, Seedra Ventures and Oqal – with a total of 67 investments.
The UAE has two: Abu Dhabi's Shorooq Partners and Dubai's Global Ventures, with a combined 16 investments.
The region falls behind others like Asia which has 786 and Europe with 1,227 VC funds. The US is the runaway leader with 2,298 – with the top seven VCs alone surpassing the Middle East's total.
Data on how much these VCs are investing in AI is not clear, yet looking at the regional number of AI start-ups serves as a telling indicator of the sector's growth.
There are 1,843 AI start-ups in the Middle East, with a total of 1,773 funding rounds that have raised $12.9 billion, data from industry tracker Crunchbase shows.
In comparison, the whole of Europe has 9,994 AI start-ups with 10,598 funding rounds attracting $37.8 billion, according to the San Francisco-based start-up data platform.
The top 10,000 AI start-ups in Asia have conducted 8,989 rounds that have raised $105.3 billion, while those in the US have had 17,320 rounds attracting $211.5 billion, it said.
However, according to industry tracker Tracxn, there are an estimated 23,209 AI start-ups in the US.
UAE
The UAE, the Arab world's second-biggest economy, has long been an early adopter of emerging technologies and has long recognised the potential of AI, ramping up investments since 2017. This was further magnified when it appointed Omar Al Olama as Minister of State for AI, Digital Economy and Remote Work Applications that year.
And the Emirates has heavily encouraged all stakeholders to participate to realise the goals and benefits of technology, rolling out programmes and initiatives designed to encourage a more holistic and well-rounded ecosystem, which in turn would be a magnet for funds.
“Middle Eastern funds are typically smaller than their global peers and not commonly vertically focused on a specific industry or technology … while the region's venture funds are still catching up to global giants in size, they offer a distinct advantage: deep regional integration with the private and public sectors,” Philipp Pabst, a senior associate at the Dubai Future District Fund, told The National.
“However, as AI is supercharging productivity across the board, regional funds strategically focused on sub-sectors that align with local needs and government initiatives are starting to pay more attention to this technology's potential.”
In May, Adnoc, AI and cloud computing company G42 and its AI unit Presight unveiled a new shareholding structure for their AIQ joint venture, in another move signalling AI advancement in the industry.
The restructuring will “combine AIQ's breakthrough AI energy solutions with Presight's cross-sector big data analytics product development, and international markets access to position AIQ as a leading energy-focused AI organisation”, Adnoc said.
In April, G42 announced a $1.5 billion investment from Microsoft, in addition to the creation of a $1 billion fund to support developers.
Also in the same month, Abu Dhabi’s Artificial Intelligence and Advanced Technology Council announced the launch of MGX, backed by the emirate's sovereign wealth fund Mubadala Investment Company, as well as G42.
In February's World Governments Summit in Dubai, the Technology Innovation Institute – the research arm of Abu Dhabi’s Advanced Technology Research Council – introduced a $500 million programme to boost AI research and development.
Dubai has also spearheaded industry initiatives such as the Dubai Future Labs, the first Dubai Assembly for Generative AI and the Global Prompt Engineering Championship, held last month.
“The UAE's comprehensive approach … from funding and regulatory frameworks to international collaboration platforms sets a global standard,” said Mr Caspers-Pabst.
Saudi Arabia
Saudi Arabia, the Arab world's largest economy, has also been attracting technology players, reflected in key investments such as the setting up of cloud and data centres, and attracting more tech talent.
The kingdom has spent the past five years building a strong foundation “to become a globally competitive, data- and AI-driven economy”, said consultancy Accenture.
Riyadh is planning deep investments in the sector, and is in the process of creating a $40 billion fund to invest in AI, according to a New York Times report in March.
That would make the kingdom the world's biggest investor in the technology, and would be a “game-changer” that would see other Gulf countries “likely to follow suit” and catalyse the region, said Mr Soliman.
“The region offers a compelling case for AI investors. Governments are actively supporting AI development through funds and initiatives. There's a large, young and tech-savvy population. Several well-developed industries in the Gulf like finance and healthcare present fertile ground for AI solutions,” he said.
Last August, the UAE and Saudi Arabia in August were reported to have acquired thousands of top-end AI chips from Nvidia – the leader in the AI hardware race and Wall Street's current stock market darling.
On the sidelines of the WGS in February, Nvidia chief executive Jensen Huang said it is “imperative” for the UAE to scale up its investment in AI if it wants to become a leader in the next Industrial Revolution.
OpenAI's chief executive Sam Altman, also at the WGS, said the UAE is well-positioned to be a leader in AI.
Qatar is also ramping up its AI plans, having launched its AI strategy in 2019 that focuses on talent, jobs, the knowledge economy and ethics.
At the recent Web Summit, held in Doha for the first time, the Qatar Free Zones Authority and Germany's Centre for Tangible Artificial Intelligence and Digitalisation announced a partnership to establish an AI applied research centre within the country's free zones.
“There are few places in the world with tech-friendly governments, vast capital, a small enough population and AI focus of the Gulf, outside of North America,” Sam Blatteis, founder and chief executive of Dubai-based government relations firm The Mena Catalysts, told The National.
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The UAE is 10th on the list of countries that have the most technological expertise, according to US News and World Report. Japan tops the list, followed by South Korea, China, the US, Germany, Singapore, the UK, Russia and Switzerland.
“As AI companies look at the global geo-economic map, expanding at-scale requires more than just ambition. It requires intelligence, networks, ally-building and a plan, and that's why world-class [tech] athletes like Sam Altman and Jensen Huang are increasingly being seen here,” said Mr Blatteis.
Attracting the money
In order to position itself as an attractive destination for tech investment, the UAE enacted several programmes early on that provide incentives and the opportunity for companies to tap into its fast-developing infrastructure, powered by the latest innovations such as AI.
This includes the government's push to adopt Fourth Industrial Revolution technologies, talent development through initiatives such as the training of one million AI prompt engineers and also the establishment of a chief executive for AI across federal entities.
Together, they contribute to the momentum of global venture capital funds investing in AI in the Middle East, increasing on the back of the region's AI consolidation.
“As AI is supercharging productivity across the board, regional funds strategically focused on sub-sectors that align with local needs and government initiatives are starting to pay more attention to this technology's potential,” Mr Caspers-Pabst said.
Indications point to the GCC being “welcoming” to AI companies, with the Gulf economies “moving light years ahead from where they were”, said Mr Blatteis.
“The global AI investments of Gulf leaders are capturing the public imagination … backing up their plans with projects, establishing data centres, physical infrastructure and swanky new offices.”
All these initiatives from the Middle East are aimed at serving untapped markets that require AI solutions, including in health care, financial services, education and smart cities.
Consumers continuously seek services that are better, faster and more convenient. Companies must recognise these demands and keep pace by applying the latest tech that appeal to consumers, said PwC in its 2018 report.
And these opportunities could increase the economic impact of AI on the region – anywhere between 20 per cent to 34 per cent annually – with the fastest growth in the UAE, followed by Saudi Arabia, the report stated.
Mr Caspers-Pabst said the long-term effect of this could see region's AI products and services on the global market. “This presents a compelling opportunity for investors seeking to invest in home-grown opportunities that have the potential to be exported internationally,” he added.
