MENA AI funding hits USD 858 mn in 2025, led by the UAE and Saudi Arabia

MENA AI venture funding climbed to USD 858 mn in 2025 as AI-native ventures dominated investments and Gulf markets anchored momentum, capturing 22% of total VC funding, according to a Magnitt report. AI-native firms — companies that embed AI in their core operations and framework — pulled in 69% of total AI funding, or USD 589 mn. AI-enabled ventures, which use AI as a tool to boost their systems, accounted for the rest, raising USD 269 mn.

The top players: The UAE captured 60% of the region’s total AI funding at USD 519 mn, a 267% surge y-o-y, with AI-native startups accounting for USD 392 mn. Saudi Arabia followed with USD 235 mn in investments, representing 27% of total AI funding and climbing 248% y-o-y, anchored by USD 170 mn in AI-native capital. Egypt raised USD 73 mn across 15 transactions, up 88% y-o-y and accounting for 8% of regional AI funding.

The sectoral breakdown: Sports and fitness topped AI funding, pulling in USD 250 mn — driven entirely by Xpanceo’s USD 250 mn Series A — and accounting for 29% of total AI investment. Fintech followed with USD 157 mn, up 198% y-o-y, while enterprise software attracted USD 104 mn, a 131% increase y-o-y. IT solutions raised USD 63 mn and real estate secured USD 56 mn, largely due to Nawy’s USD 52 mn Series A.

Deployments were balanced between early-stage ventures and more mature companies across the region, which is a sign of a maturing market that is looking towards larger ticket sizes and growing AI ventures but also maintains a focus on early-stage firms, Magnitt’s Research Department Manager Farah El Nahlawi told EnterpriseAM. Investment ticket sizes were varied, with AI transactions ranging from as low as USD 3 mn to Xpances’s USD 250 mn — a mix of large outliers and smaller rounds.

Case in point: Pre-seed and seed AI transactions rose 56% y-o-y to 117 transactions. Meanwhile, Series A activity scaled, with transaction count increasing to 10 from six and funding surging to USD 485 mn. This performance points to a maturing pipeline, involving a strong early formation alongside a growing cohort of AI startups advancing toward commercial scale.

Strong activity across every stage of the startup pipeline was Saudi Arabia’s main highlight this year, supporting a more resilient AI ecosystem, El Nahlawi told us. This is evidenced by a 79% surge in AI transaction volume (reaching 68 transactions) and widespread support for early and mid-stage companies.

Egypt’s AI sector is more skewed towards utility and addressing needs, El Nahlawi said. The country’s relatively smaller market size and liquidity constraints, compounded by currency and macro challenges, are making it a regional hub for applied AI. Funding is directed toward solutions that meet immediate demand, such as proptech and fintech, rather than areas with more uncertain growth.

What’s next? The AI and VC ecosystem outlook is positive for the UAE and KSA this year thanks to strong capital flows, sovereign support, and rising international interest, El Nahlawi told us. Despite risks from higher interest rates, weaker oil prices, and geopolitical tensions, current low rates and market optimism support growth. With regional AI funding up fivefold since 2021, continued investment and ecosystem development position AI as a pillar of the region’s venture growth in 2026.

MARKETS THIS MORNING-

Asian markets are mostly in the red, with AI jitters hitting US stocks also reaching sentiment in the region. Both Japan’s Nikkei and Topix fell around 0.6%, while Hong Kong’s Hang Seng is down 1.4% South Korea’s Kospi was the only outlier, adding 0.5%.

THE CLOSING BELL-

The ADX rose 0.3% yesterday on turnover of AED 1.3 bn. The index is up 7.0% YTD.

In the green: Ins. House (+14.9%), Aldar Properties (+5.5%), and Americana Restaurants International (+5.3%).

In the red: Hayah Ins. (-7.1%), Fertiglobe (-3.2%), and AD Ports Group (-2.9%).

Over on the DFM, the index rose 0.4% on turnover of AED 653.7 mn. Meanwhile, Nasdaq Dubai was up 0.6%.