As the Gulf region gains strategic importance in the tech war between the U.S. and China, Microsoft is making a big move into one of the Middle East’s oil-rich countries.
On Monday evening, Microsoft announced a $1.5 billion investment in Group 42 Holdings (G42), the Abu Dhabi-based AI company that has become a major force in the United Arab Emirates’ effort to be a global leader in artificial intelligence. The minority stake will give Brad Smith, Microsoft’s vice chair and president, a seat on G42’s board of directors.
The deal signifies more than a commercial collaboration between two AI titans — it serves as evidence of two countries’ strategic positioning amid rising geopolitical tensions.
The funding comes as U.S. politicians’ grow increasingly concerned about G42’s ties with China. In January, the bipartisan House Select Committee on the Chinese Communist Party sent a letter to Commerce Secretary Gina Raimondo, urging the Department of Commerce to investigate G42 for inclusion on the Bureau of Industry and Security’s Entity List, which would bar the Emirati company from accessing sensitive U.S. technologies.
Such a move would put G42 under the same security concerns umbrella as Huawei, which was placed on the Entity List in 2019. Huawei has since been restricted from acquiring critical U.S. technologies, including high-end chips and certain Android services.
Microsoft’s investment this week appears to be an indication of which superpower G42 has aligned itself with.
Delicate dance
Though a long-time economic and military ally of the U.S., the UAE has in recent times diverged from Washington’s foreign policy, and expanded its partnerships with China, a development that worries Washington.
Last year, the UAE’s president, Mohamed bin Zayed Al Nahyan, attended Russia’s flagship economic forum, which was largely shunned by Western countries in protest of the Ukraine war. The UAE has also increased military cooperation with China, and has even planned their first joint air force training last year.
Given the two countries’ burgeoning economic alliance, it’s no surprise that G42, which is spearheading the UAE’s AI development, has also forged ties with Chinese firms. These commercial relationships, however, have greatly concerned the U.S.
In its letter to Raimondo, the House Select Committee on the CCP noted that G42 maintains relationships with entities like Huawei, the Beijing Genomics Institute (BGI) and Tencent.
The Committee also highlighted the background of G42’s CEO Peng Xiao, who previously held a senior position at a subsidiary of DarkMatter, a company that develops “spyware and surveillance tools that can be used to spy on dissidents, journalists, politicians, and U.S. companies,” the committee wrote.
Given these alleged Chinese ties, the committee is concerned that G42 can be a way for Chinese firms to access U.S. technologies that are otherwise under export controls. The Committee is in particular wary of its “extensive commercial relationships” with U.S. tech companies including Microsoft, Dell, and OpenAI.
Picking sides
Microsoft investment in G42 is an uncommon example of a deal that’s received overt backing from their respective governments. According to the companies’ statement, this “commercial partnership is backed by assurances to the U.S. and UAE governments through 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.”
If the deal goes through, it will designate Microsoft as G42’s official cloud partner. Under the agreement, the Emirati company’s data platform and other key infrastructure will migrate to Microsoft Azure, which will power G42’s product development. G42 already has a partnership with OpenAI that commenced in 2023.
The partnership with Microsoft appears to be part of an ongoing effort at G42 to tone down its Chinese influence. The firm divested its China-related investments, including its shares in TikTok parent ByteDance, this February. Xiao also said late last year that the firm planned to phase out Chinese hardware, saying, “We cannot work with both sides.”
What Microsoft gains in return is extensive access to the region’s market. Its AI business and Azure will get access to a range of industries like financial services, healthcare, energy, government and education. The partnership will also see the pair launching a $1 billion fund “for developers to boost AI skills” in the UAE and the broader region.
As tech companies have learned in the past few years, it has become increasingly difficult to avoid choosing sides between the U.S and China — whether in terms of technology vendors, users or investors. The developments around G42 demonstrate that even a country like the UAE, which has sought to maintain a neutral stance, may ultimately be forced to take a side.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
