🤑5X More Cash for AI

AI funding from Middle Eastern sovereign wealth funds soars 5X in a year

Key Points 

• Middle Eastern sovereign wealth funds have ramped up their AI investments, with funding increasing fivefold in just one year.

• Silicon Valley investors worry about a "SoftBank effect," where inflated valuations from rapid funding could lead to market instability.

📒Context of the news - Countries like Saudi Arabia, the UAE, Kuwait, and Qatar are actively diversifying their economies and turning to AI investments as a key strategy.

☕News - According to a recent report by research firm Pitchbook, funding for AI companies from Middle Eastern sovereign wealth funds has shot up fivefold in the past year. 

While only a few venture capital firms can match the large investments made by companies like Microsoft and Amazon, these sovereign funds have plenty of cash to invest in AI, driven by rising energy prices that have strengthened their financial positions.

But it’s not just Middle Eastern funds pouring money into AI. The French sovereign fund Bpifrance has made 161 deals in AI and machine learning over the past four years. Meanwhile, Singapore’s Temasek has completed 47 deals, and another Singapore-backed fund, GIC, has finished 24 deals, according to additional data from Pitchbook.

🌟Why this matters - For the U.S., it's crucial to get these funds to invest in American companies instead of in rivals like China. Jared Cohen from Goldman Sachs noted that countries like Saudi Arabia and the UAE have a lot of money to invest and are willing to do so globally. He called them "geopolitical swing states," which highlights their significant role in shaping investment trends.

🙃How it could turn problematic - The surge of cash from sovereign wealth funds has some Silicon Valley investors worried about a potential "SoftBank effect." This term comes from Masayoshi Son’s Vision Fund, which backed companies like WeWork, pushing their valuations to sky-high levels before it ultimately spiraled.

Brazilian president Lula's vision for AI talks at the G20

Key Points 

• Lula is committed to amplifying the voices of developing nations in AI discussions as Brazil leads the G20.

• At the G20 summit, Lula plans to create a governance framework that considers the needs of Global South countries.

🥸Context of the news - With the world's largest economies struggling to agree on the future of artificial intelligence, Brazil's President Luiz Inacio Lula da Silva is determined to make sure developing countries have a voice in the conversation.

🌍News - As Brazil leads the G20 this year, President Lula da Silva has put AI at the top of his agenda, hoping to shape the regulatory talks happening across Europe, Asia, and at the United Nations, where AI is expected to be a hot topic at this week's General Assembly.

Lula is looking to use the G20 leaders summit in November to create a governance framework that includes the needs of Global South countries and brings AI superpowers like China and the U.S. to the table, according to sources close to him. 

🫠Here’s where it gets tricky -

• First, Lula will have to persuade countries competing in the tech arms race that Brazil, which isn’t as advanced in AI capabilities as other G20 nations, is the right choice to lead this discussion.

• Then, even if Brazil manages to create a framework, it will also need to make sure that other countries actually stick to the guidelines; otherwise, it could end up being just another G20 resolution that lacks real impact.

• Lastly, Brazil’s Minister of Science and Technology, Luciana Santos, pointed out that the biggest challenge will be tackling existing inequalities. She noted that to address these gaps within countries, it’s important to first encourage AI development, especially in the Global South.