Microsoft Corp. MSFT has announced a $1.5 billion investment in the United Arab Emirates’ leading artificial intelligence firm, G42. The investment will also secure Microsoft a seat on G42’s board, indicating a strategic shift towards strengthening G42’s commitment to reducing its presence in China.
What Happened: The investment deal was inked by Microsoft President Brad Smith and G42 CEO Peng Xiao, with the backing of the UAE and U.S. governments. The agreement entails G42’s use of Microsoft’s Azure cloud for its AI applications, reported Bloomberg.
Smith will join G42’s board, marking an expansion of the existing partnership between the two companies. Smith stated, “Microsoft got strong encouragement from the U.S. government to move forward in this process.” The investment grants Microsoft a minority stake in G42, although the exact financial terms remain undisclosed, according to the report.
"There are markets today where Microsoft and really no American technology company has a real data center presence," Smith said. "This is the kind of partnership that can really bring the cloud and AI to the global south probably a decade faster than would otherwise be the case."
As part of the deal’s later stages, Microsoft aims to host some of its applications in G42’s data centers to reach customers in Africa and Central Asia. The two companies also plan to establish a $1 billion fund for developers.
The deal, which follows a year of discussions, comes after G42 pledged to reduce its presence in China and invest in key Western markets. G42, a leader in the UAE’s AI push, is part of the $1.5 trillion empire of UAE National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan.
Why It Matters: This investment comes at a time when Microsoft’s growth is soaring with AI innovations. According to a Morgan Stanley analyst, Microsoft is projected to lead in public cloud by 2032.
The company has been making strategic moves to boost its AI and cloud capabilities, including a $2.9 billion investment in data centers in Japan and backing OpenAI’s expansion in Tokyo.
Furthermore, a Wedbush Securities analyst predicts a seismic shift in IT spending towards AI and related technologies, which could account for 8%-10% of IT budgets in 2024. This trend could significantly benefit major tech players like Microsoft.
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