Microsoft invests US$1.5 billion in UAE’s G42 in pivot from China

Microsoft will invest US$1.5 billion in the United Arab Emirates’ top artificial intelligence (AI) firm, G42, after the Abu Dhabi-based company worked out an unusual deal with the US government to end any cooperation with China.

The agreement follows behind-the-scenes negotiations between the US government and the Middle Eastern firm, in which G42 agreed to divest from China and pivot to American technology. G42, a leader in the UAE’s push into AI, had come under scrutiny for alleged ties to blacklisted Chinese companies and its government.

The Microsoft investment will align a key Middle East firm with the US, as Washington seeks to curtail Chinese access to AI technologies. As part of the accord, Microsoft president Brad Smith will join G42’s board, and G42 will use the US software maker’s Azure cloud service for its AI applications.

“Microsoft got strong encouragement from the US government to move forward in this process,” Smith said in an interview with G42 chief executive officer Peng Xiao. “That reflects a recognition by the US government of the importance of the relationship between the two countries and the importance of continuing to encourage responsible companies like G42 and Microsoft to really be at the forefront, not only of the technology itself, but of world-leading security and safety and responsible AI standards.”

G42 held talks with the US Commerce Department’s Bureau of Industry and Security and came to an understanding last year, according to people familiar with the discussions. Under the arrangement, G42 agreed to pare back its presence in China or face potentially punitive measures from Washington, they said.

The firm had been criticised in Washington, with one key lawmaker calling for sanctions because of alleged links to Chinese businesses, including Huawei Technologies. The firm “categorically” denied that it had “connections to the Chinese government and their military industrial complex”.