US tech giant Microsoft plans to invest USD 1.5 bn in International Holding Company-backed tech and AI group G42 to help boost its global expansion plans and promote the UAE’s position as “a global AI hub,” according to statements from G42 and Microsoft. The investment will give Microsoft President Brad Smith a seat on G42’s board.

The details: Under the agreement, Microsoft will hold an unspecified minority stake in G42, while G42 will use Microsoft’s cloud platform, Azure, to run its AI platforms and services and deliver advanced AI services to its public and private sector customers. At a later stage, Microsoft will be able to host some of its applications in G42’s data centers to expand its customer outreach to Africa and Central Asia, Bloomberg reports, citing Smith.

The two firms will also jointly set up a USD 1 bn fund to support AI developers, geared at strengthening the AI infrastructure and capabilities in the UAE and the wider MENA region. No further details were provided on the fund.

Expanding an existing friendship: The companies revealed a partnership last September to jointly develop cloud services and expand Microsoft’s data center infrastructure in the UAE. Additionally, the companies inked an MoU in April 2023 to explore the development of customized cloud solutions.

What they said: “Through Microsoft’s strategic investment, we are advancing our mission to deliver cutting-edge AI technologies at scale. This partnership significantly enhances our international market presence, combining G42’s unique AI capabilities with Microsoft’s robust global infrastructure. Together, we are not only expanding our operational horizons but also setting new industry standards for innovation,” G42 CEO Peng Xiao said.

The agreement could speed up global AI deployment: “There are markets today where Microsoft and really no American technology company has a real data center presence. 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,” Smith told Bloomberg.

Both gov’ts gave the all-clear on the agreement: Backed by the US and UAE governments, the investment is the outcome of a “first-of- its-kind binding agreement to apply world-class best practices to ensure the secure, trusted, and responsible development and deployment of AI,” Microsoft said. The two governments consulted on the Intergovernmental Assurance Agreement (IGAA) between G42 and Microsoft, specifically drafted for the transaction.

G42 is delivering on its promise to expand in western markets, “from Israel to Germany, to the UK and US,” Xiao told Bloomberg in February, saying that the company has been pursuing a “commercial strategy since 2022 to fully align with our US partners and not to engage with Chinese companies.”

REMEMBER- G42 had offloaded all its stakes in Chinese businesses in a bid to reportedly appease US partners, including a USD 100 mn stake in TikTok parent company ByteDance. The company’s CEO Peng Xiao had vowed to phase out its stakes in Chinese hardware suppliers in statements to the FT last December. A Bloomberg report out yesterday claims that G42 held private talks with the US Commerce Department’s Bureau Industry and Security for G42 to scale down its investments in Chinese businesses, which ultimately paved the way for Microsoft’s investment.

G42 could back away even more from China, including giving up its use of Huawei telecom equipment, which Washington “fears could provide a backdoor for the Chinese intelligence agencies,” according to the New York Times.

The story got plenty of ink in the foreign press: Reuters | New York Times | Financial Times | Bloomberg | CNBC | Wall Street Journal

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