On April 15, local time, Microsoft announced on its official blog that it would invest $1.5 billion in G42, an Abu Dhabi-based UAE artificial intelligence company. At the same time, Microsoft will take a minority stake in G42, and its president, Brad Smith, will join the G42 board, which will run its AI applications and services through Azure, Microsoft's cloud computing platform.
On April 16, local time, the Washington Post reported the news that the investment deal could limit China's influence in the Gulf region at a time when the technology competition between China and the United States is becoming increasingly fierce. The report quoted people familiar with the matter, who requested anonymity, to disclose that as part of the talks, the G42 had agreed to divest from China and remove Chinese equipment from its business, among which Huawei was named.
Bloomberg reported on the same day that the investment deal will bring the G42, an important Middle Eastern company, into an "alliance" with the United States at a time when the United States is trying to limit China's access to artificial intelligence technology. The report also quoted people familiar with the matter as revealing that the U.S. government intervened behind the negotiations on "terminating any cooperation with China", and said that before reaching this "unusual agreement", the G42 had been reviewed by the U.S. side and faced punitive sanctions, and now the U.S. side is "deeply encouraged and satisfied."
Microsoft made the announcement on its official blog account
On April 16, Microsoft President Smith said in a blog post that Microsoft's agreement with the G42 will deepen international ties in the field of artificial intelligence while ensuring that the technology adheres to "world-leading standards for safe, trustworthy and responsible AI." "Our two companies will not only work together in the UAE, but will also bring AI and digital infrastructure and services to underserved countries," he wrote, who will join the G42 board. ”
Smith also revealed in an interview that Microsoft has received a lot of encouragement from the U.S. government in this process. "This reflects the U.S. government's recognition of the importance of the relationship between the two countries and the importance of continuing to encourage responsible companies like the G42 and Microsoft to be at the forefront, not only in the technology itself, but in the world's leading standards for safe and responsible AI. ”
The Washington Post, citing people familiar with the matter, said Microsoft had been negotiating the deal with the U.S. and UAE governments for more than a year to ensure that all parties were satisfied with the terms. Sources quoted by Bloomberg said that the G42 began negotiations with Microsoft at the end of 2022 and also negotiated with the Bureau of Industry and Security (BIS), which is responsible for national security-related export controls under the US Department of Commerce, and reached an "understanding" last year. Under this arrangement, the G42 agreed to divest from China and switch to American technology.
The investment agreement was reportedly signed during Smith's visit to Abu Dhabi earlier this month. In February, Xiao Peng, the Chinese-American CEO of G42, said in an interview that the company would cut back its operations in China and pledged to invest in major Western markets.
Mr. Xiao declined to disclose the financial terms of the deal or how much G42 would invest in Microsoft's cloud services, which he said was an extension of the two companies' existing partnership. Xiao Peng also said that G42 is not seeking more investment, but is seeking more partners. "Through this anchoring relationship with Microsoft, we will be able to work with more global partners in the field of AI and cloud computing. ”
According to the New York Times, G42 takes its name from Douglas Adams' science fiction series "The Hitchhiker's Guide to the Galaxy," in which the number "42" represents "the ultimate answer to life, the universe and anything," and the letter "G" represents the group.
G42's business includes a $10 billion technology investment fund, an Arabic AI model, a tech talent platform, a healthcare company, and a genome sequencing project, to name a few. Bloomberg reported that G42's overseas investments included a $100 million acquisition of a stake in ByteDance, the Chinese parent company of popular social media app TikTok, earlier last year.
It is worth mentioning that Sheikh Tahnoon bin Zayed Al Nahyan, the chairman and controlling shareholder of G42, is one of the richest and most influential people in Abu Dhabi. He is the UAE National Security Advisor and Chairman of the Abu Dhabi Investment Authority, Abu Dhabi's third largest sovereign wealth fund, ADQ (Abu Dhabi Development Holdings Limited).
G42 Chairman Sheikh Takhnun bin Zayed (center) is one of the most powerful people in the UAE. Picture from the New York Times
The Washington Post and the New York Times said that previously, the G42 caused "unease" in the U.S. government because of its "cooperation with Chinese companies" and "close relations with China", and was scrutinized by the U.S. Congress, and U.S. officials frequently hyped up the so-called "security threats", claiming that key information such as "advanced technology" and genetic data in the United States may be "leaked to China" through the G42.
The New York Times revealed that when Al Nayan visited the United States in June last year, Sullivan, the president's national security adviser, told him that U.S. officials suspected the G42 group of "concealing cooperation with China." U.S. intelligence officials claim that the G42 works with a number of Chinese companies that "pose a security threat to the United States," including technology companies such as Huawei, which have been sanctioned by the United States.
At the White House meeting, U.S. President Joe Biden also raised "concerns" with Al Nayan in an attempt to push the G42 to "cut ties with Chinese companies and any institutions," more than a dozen people familiar with the matter said. U.S. officials have even discussed the feasibility of sanctioning the company, trying to force the UAE to choose between the U.S. and China.
On January 4 this year, the U.S. House of Representatives' Select Committee on U.S.-China Strategic Competition (hereinafter referred to as the "China Committee") sent a letter to U.S. Secretary of Commerce Raimondo, asking her department to consider imposing export controls on the G42 and several related companies, claiming that the G42 has so-called "links" with Chinese companies, including Huawei. The G42 denied that it had "ties to the Chinese government and its military-industrial complex."
G42 told The Washington Post that the company began phasing out existing Chinese devices in 2022 and adopting more Microsoft technology. After that, Republican Congressman Mike Gallagher, chairman of the US "China Committee", said that he was "satisfied" with the G42 decision. According to Bloomberg, the G42's pivot comes against the backdrop of a broader U.S. crackdown on what it calls "entities with close ties to China."
In recent years, Microsoft has pushed itself to the forefront of the AI revolution by partnering with smaller companies, including investing billions of dollars in OpenAI, the maker of ChatGPT, according to the report. OpenAI is also a partner of G42, and the company is working with the Gulf company as part of its expansion in the UAE and beyond. Bloomberg reported last year that Microsoft, OpenAI's largest investor, had been in discussions with G42 to raise money for a new chip company, but the status of these talks is unclear at this time.
Data map: Xiao Peng, CEO of G42 Chinese, and Altman, head of OpenAI. Picture from the New York Times
The Washington Post noted that AI has become a "tipping point" amid rising tensions between China and the United States, with the latest deal giving a major US tech giant an impact on the UAE's burgeoning AI sector, while some have been concerned that China is seeking more investment in the region.
Brittany Caplin, a spokesman for the U.S. Commerce Department, said April 14 that the U.S. often works with other countries, including the United Arab Emirates, to expand opportunities for U.S. businesses while balancing national security concerns. And U.S. lawmakers from both parties are "encouraged" by the agreement's potential to promote U.S. technology leadership.
On March 28, Chinese Foreign Ministry Spokesperson Lin Jian held a regular press conference. On the same day, a reporter from China-Arab Satellite TV asked a question about the fact that G42, an artificial intelligence company in the United Arab Emirates, was "forced to take sides" from China. Do you have any comment?
Lin Jian said that we have taken note of relevant reports. I would like to stress that China has always opposed the politicization, weaponization and pan-security of economic and trade issues, and opposes economic coercion that undermines the international economic and trade order and trade rules and threatens the stability of global industrial and supply chains.
Earlier, in response to the US hype that the UAE AI company's cooperation with Chinese companies such as Huawei poses a security threat, another Chinese Foreign Ministry spokesperson, Wang Wenbin, said that the US has repeatedly sabotaged the cooperation between Chinese companies and other countries on trumped-up security grounds, which is an act of economic coercion. When the relevant countries asked the US side to provide credible evidence of the so-called "security threat", the US side was vague.
Wang Wenbin stressed that China has always opposed the US side's generalization of the concept of national security, politicization, weaponization and pan-security of economic and trade issues, and obstruction of normal investment and business activities between industries and enterprises. The US actions have seriously undermined international economic and trade rules and undermined the security and stability of global industrial and supply chains.
Source: Observer.com