Saudi Arabia’s US$40 Billion AI Fund: Outlook and Opportunities

Saudi Arabia’s government is planning to establish a US$40 billion fund dedicated to AI investment, signaling a strategic move to diversify its economy and solidify its position as a dominant force in the Middle East’s AI landscape.

By Giulia Interesse

Traditionally known for its abundant oil reserves, Saudi Arabia is undergoing a significant transition aimed at diversifying its economy and realizing the goals outlined in the Vision 2030. This ambitious roadmap seeks to create new job opportunities, foster economic growth, and empower people through education and skills training. As part of this transition, the Kingdom is strategically investing in key emerging sectors, such as artificial intelligence (AI).

Saudi Arabia’s government is reportedly planning to establish a monumental US$40 billion fund dedicated exclusively to AI investment (“AI Fund”).

In this article, we explore the scope and implications of Saudi Arabia’s significant investment in the AI sector for its economy.

Saudi Arabia’s AI Fund: Everything we know so far

Saudi Arabia’s AI Fund initiative, spearheaded by the Kingdom’s Public Investment Fund (PIF), is advancing discussions about potentially establishing an office in Riyadh for the US venture capital firm, Andreessen Horowitz. Andreessen Horowitz is known for its investments across various sectors, including healthcare, consumer goods, cryptocurrency, gaming, fintech, education, and enterprise IT, with a focus on areas like cloud computing, security, and software as a service (SaaS). This strategic move underscores Saudi Arabia’s commitment to nurturing a robust ecosystem for AI development.

Scheduled to launch in the latter half of 2024, Saudi Arabia’s AI Fund aims to attract a diverse range of investors, indicating a concerted effort to enhance the Kingdom’s tech startup landscape. The overarching vision is clear: to bolster AI-related ventures, including chip manufacturers and large-scale data centers, with the objective of positioning Saudi Arabia as a global leader in AI technology within the Middle East region and beyond.

Saudi Arabia’s new investment drive is expected to kick off in the second half of 2024, with the potential participation of even more global venture capital firms.

Saudi Arabia’s strategy for AI

Central to Saudi Arabia’s Vision 2030 is the acknowledgment of AI’s immense transformative power across diverse sectors. AI is regarded as a powerful tool to elevate productivity, efficiency, innovation, and creativity, while addressing pressing challenges like water scarcity, environmental sustainability, healthcare, education, and security.

To materialize its AI aspirations, Saudi Arabia has laid down a comprehensive framework guided by the National Strategy for Data and Artificial Intelligence (NSDAI), initiated in 2020. NSDAI’s overarching objective is to position Saudi Arabia as a global leader for data and AI by the year 2030.

This strategy delineates four primary objectives:

• Facilitating data-driven decision making: NSDAI endeavors to promote data-driven decision-making processes across governmental and private sectors, facilitating evidence-based policy formulation.
• Cultivating talent and expertise: Recognizing the importance of human capital, the strategy seeks to nurture a robust ecosystem for local and international talent in the realms of data and AI.
• Fostering innovation and entrepreneurship: A pivotal aspect of NSDAI is the cultivation of a culture conducive to innovation and entrepreneurship in the fields of data and AI, stimulating economic growth and technological advancement.
• Promoting ethical and responsible use of AI: NSDAI places significant emphasis on the ethical and responsible utilization of data and AI, prioritizing societal welfare and humanity’s collective benefit.

To operate this strategy effectively, the Kingdom has established the Saudi Data and Artificial Intelligence Authority (SDAIA). Tasked with setting standards, policies, and regulations, SDAIA oversees the development and execution of national initiatives and projects such as the National Data Bank, the National Information Center, and the National Center for AI.

Additionally, SDAIA has rolled out various initiatives and platforms to accelerate the adoption and innovation of data and AI within Saudi Arabia. These include programs such as the Global AI Summit, AI Artathon, AI Academy, and AI Startup Studio, each geared towards supporting collaboration, innovation, and skill development within Saudi Arabia’s AI landscape.

Foreign investment and competitiveness

Saudi Arabia’s substantial investments in cloud computing and other digital infrastructure essential for AI development signal robust foreign interest in the Kingdom’s burgeoning tech market.

Microsoft has already injected US$2.1 billion into the development of the Kingdom’s cloud infrastructure, while Oracle has announced a US$1.5 billion investment to bolster its cloud capacity.

In addition, Chinese technology giant Huawei has disclosed a further US$400 million investment aimed at establishing a cloud region in Saudi Arabia, contributing to its technological expansion. Similarly, a strategic collaboration has been forged between Zoom and Aramco.

More recently, during a tech conference held in Riyadh in March 2024, Amazon Web Services (AWS) committed US$5.3 billion to the establishment of a cloud region in Saudi Arabia, featuring three “Availability Zones”, each representing a distinct data center.

All these strategic investments not only reinforce Saudi Arabia’s position as the largest digital market in the Middle East and North Africa but also present significant opportunities for tech companies to forge impactful partnerships.

Furthermore, this influx of investment positions Saudi Arabia in direct competition with leading AI markets, such as the UK, Canada, and Europe, as well as global tech giants like China and the United States.

Such developments indicate the potential impact of the AI Fund on Saudi Arabia’s technology ecosystem while aligning with broader national strategies for economic diversification and technological advancement.

Opportunities in Saudi Arabia’s AI sector

Saudi Arabia’s robust commitment to modernization and its implementation of Saudi Vision 2030 have positioned it as a key player in the global tech industry. Propelled by this strategic approach, the Kingdom’s AI market is forecasted to reach a value of US$1.51 billion by 2024, with an anticipated annual growth rate (CAGR 2024-2030) of 16.36 percent. This growth trajectory is expected to boost the market volume to US$3.75 billion by the year 2030.

Moreover, with substantial investments in information and communications technology (ICT) projected at US$34.6 billion, Saudi Arabia is solidifying its leadership in the MENA region’s digital transformation.

Tech companies venturing into the Kingdom can leverage the existing infrastructure and support provided by established industry players, ensuring a smooth entry into the market and unlocking unprecedented growth opportunities.

Furthermore, with initiatives to promote entrepreneurship and support tech startups, such as innovation hubs like the King Abdullah University of Science and Technology (KAUST) and the NEOM project, Saudi Arabia offers a fertile ground for innovation and collaboration.

By capitalizing on the Kingdom’s visionary roadmap, supportive infrastructure, and strategic initiatives, businesses and investors have the unique opportunity to position themselves as pioneers in this dynamic market and achieve remarkable growth and success.

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