US Microsoft Invests 2 Trillion Won in UAE AI Company to "Counter China"

Microsoft (MS) is set to invest approximately 2 trillion won in G42, a state-owned artificial intelligence (AI) company in the United Arab Emirates (UAE). The move aims to gain an edge over China in the Middle East, a region vigorously building AI infrastructure fueled by strong 'oil money.'

According to the New York Times (NYT) on the 15th (local time), MS plans to announce a partnership on the 17th to invest $1.5 billion (about 2 trillion won) in G42. G42 is a major AI company in the Middle East involved in developing 'Jais,' an Arabic large language model (LLM). According to the NYT, a key aspect of this partnership is MS granting G42 the rights to sell MS services using advanced AI chips.

As governments in the Middle East, including the UAE, have designated AI as a future growth engine and are investing in infrastructure such as data centers, MS is expected to continue expanding its market dominance in the region. The NYT analyzed, "Through this partnership, MS has gained potential access to vast UAE assets."

However, concerns remain as G42 has previously received significant investments from China. In January, Mike Gallagher, a Republican member of the U.S.-China Economic and Security Review Commission, urged the Department of Commerce to investigate whether G42 should be included in trade restrictions, citing G42's partnerships with companies composed of former Chinese officials. Recently, G42 has been distancing itself from China by selling its stake in ByteDance, the Chinese short-form platform TikTok's parent company, and excluding Huawei technology.

To alleviate these concerns, G42 is also set to sign a security agreement negotiated with the U.S. government. The NYT reported, "This includes a series of protective measures for AI products shared with G42, most notably an agreement to exclude Chinese-made equipment from G42's operations." Regarding the reason for signing a security agreement with the U.S. government, Brad Smith, MS President, told the NYT, "The U.S. government is concerned that the most critical technologies are protected only by American companies."

The U.S. government views this partnership as helpful in countering growing Chinese influence in the Middle East. U.S. Secretary of Commerce Gina Raimondo told the NYT, "This partnership and security agreement do not approve the transfer of AI models or GPUs (graphics processing units) and align with the values pursued by the U.S. (such as countering China)." She added, "We will ensure that such technologies are developed and protected safely."

G42 has reiterated its stance that it cannot side with both the U.S. and China in the advanced technology hegemony competition and has chosen the U.S. Peng Xiao, CEO of G42, said, "Through MS's strategic investment, we can provide cutting-edge AI technology on a large scale, enabling us to advance our mission."