Microsoft's substantial investment of US$1.5 billion has secured it a board seat in the United Arab Emirates-based AI firm G42, albeit with a trade-off.
The collaboration will focus on cloud and data center services, as well as expanding into markets in the southern hemisphere. "Microsoft's investment in G42 marks a pivotal moment in our company's journey of growth and innovation, signifying a strategic alignment of vision and execution between the two organizations," Chairman of G42 H.H. Sheikh Tahnoun bin Zayed Al Nahyan says.
However, the strengthened ties with American firms come with a cost, as G42 has committed to sever all ties with China after clandestine negotiations with the US government took place. In exchange, the UAE firm will continue to receive access to American technology, notably Nvidia's chips.
According to reports from Bloomberg and the Financial Times, Microsoft now holds a minority stake in G42 and has secured a board seat for Microsoft President Brad Smith as part of the agreement. "We will combine world-class technology with world-leading standards for safe, trusted, and responsible AI, in close coordination with the governments of both the UAE and the United States," Smith remarked of the collaboration.
US and UAE AI alliance
Peng Xiao, CEO of G42, revealed that the collaboration plans include G42 utilizing Microsoft's Azure cloud computing platform as the cornerstone for its AI product development and deployment. Through this partnership, G42 aims to establish partnerships with more businesses globally in the AI and cloud computing sectors.
Smith stated that Microsoft will utilize G42's data centers to host a portion of its AI applications and reach customers in Africa and Central Asia. "Bringing cloud and AI truly to the southern hemisphere," he proclaimed.
The two entities will also establish a US$1 billion fund to support AI development companies. The investment negotiations between Microsoft and G42 lasted a year, with officials from the US and UAE governments involved. The agreement was signed by Smith during his April visit to Abu Dhabi.
Smith expressed that Microsoft received strong support from the US government during the advancement of its collaboration with G42. He believes this reflects the US government's recognition of the importance of the bilateral relationship with the UAE.
Apart from Microsoft, G42 has deep collaborations with other US companies such as OpenAI and AI processor designer Cerebras. Analysts comment that wealthy Gulf nations, traditionally seen as good fundraising targets for Silicon Valley due to their oil wealth, are increasingly viewed by American companies as reliable technology partners.
G42 has a wide range of interests, from cloud computing to autonomous vehicles, and is the developer of the Arabic Large Language Model (LLM) Jais. Supported by Abu Dhabi sovereign wealth fund Mubadala Investment, it is also a significant participant in the UAE's AI national strategy.
Picking a side
Bloomberg has reported that G42's agreement to reduce its business ties and disengage with China was done with the permission of the US National Security Council. In the summer of 2023, US officials from the Bureau of Industry and Security told the UAE representative to choose a side during its visit.
Failure to comply could see G42 face sanctions from the US government. However, in exchange, they will also get the US technology needed for AI applications like the Nvidia chips.
The New York Times (NYT) previously reported that the Central Intelligence Agency and other US government agencies delved into the connection between G42 and Chinese companies and officials. Their scrutiny pinpointed particular areas of concern, notably G42's stacking and its foundational technical infrastructure, allegedly developed with support from Chinese firms like Huawei.
In a statement to The New York Times, Talal Kaissi, a senior executive of the company, stated that the company has worked with many international technology companies from around the world. Kaissi pointed out that the company began discussions with Microsoft at the end of 2022, attempting to replace its technology stack or infrastructure.
He said that in 2024, the company decided to seek help from US companies, including Cerebras and Nvidia, to upgrade a supercomputer and replace their "traditional technology suppliers, including hardware from China."
Kaissi stated that the company ensures that its operations and licensed technology "fully comply" with US government regulations and has consulted with relevant US agencies on compliance with these regulations. He added that it is "developing responsible AI solutions in collaboration with leading companies and organizations with shared values."
A G42 spokesperson stated that geopolitical factors affect every international company, and the decision to reduce contacts with China is because G42 hopes to collaborate with leading US and European technology companies. The statement emphasized that the opportunity to cooperate with Microsoft and OpenAI is now on the table for G42, signifying a major shift for the UAE giant amidst the new tech cold
