Major Investment: Microsoft Backs Abu Dhabi AI Company G42 with $1.5B
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Microsoft has just announced they're going to be investing $1.5 billion into a UAE AI firm. So today on the podcast, we're going to be breaking down exactly what's going on with this deal, who they're investing in, what's going on, and a bunch of the controversy that is surrounding this because they literally had to get White House approval for this deal and it gets crazy. So let's dive into it.

The first thing I want to say here is the company is G42. I'll dive into a little bit more about the company and break down what they do later. But I wanted to go off and first say they're based in Abu Dhabi, who of course is putting a huge emphasis right now on AI. I've talked with a bunch of people that

are over there and have said that it's a huge emphasis that even like up to the top leaders in their company, in their country are really focusing on making sure that AI is a big priority and they're not getting left behind in this. So they're making big moves, obviously $1.5 billion for a country. I mean, if you look at their population size, like this is actually quite impressive in my opinion. So they're making some big moves. What is interesting though, is that this firm,

uh, G42 is actually under investigation from the U S for a bunch of its different ties to China. So because of this, they had a lot of difficulties, I would say getting this deal done, but let's talk a little bit about the actual details and what's going on in this deal. So the first thing to know is that Microsoft in exchange for this, they're going to be getting a minority stake. They're going to be getting a seat on the board, um, of G42 and essentially G42 is going to be using them, um,

And mostly, right, Microsoft Azure for their cloud computing and for a lot of their cloud, you know, their cloud needs that are going to be in relation to like training a lot of their AI models and stuff. So it's kind of like one of those situations where when you're making an AI company, if you want it to be serious and you're doing a lot of your own training, the best thing you can do is kind of partner with AWS, Google Cloud or Azure, because obviously you're going to be spending such a huge percentage on

of your money, of your funds on compute and on training these actual models. It can cost hundreds of millions of dollars to train some of these. I believe like GPT-4 might've been like 600 million or something. So anyways, really crazy how much money actually goes into training these. Now there's a lot of companies,

countries and companies that are kind of working on different technology to bring down the cost and make these things more efficient. But as it sits today, they're incredibly expensive. So what's interesting is for this $1.5 billion that they're currently getting, a lot of this is probably going to go back to Microsoft via...

via their Azure platform. So Microsoft is going to be making a lot of this money back. Now, there's a whole controversial issue here that a lot of people talk about. This is kind of more for accountants and taxes, probably. But essentially, a lot of these cloud providers, they're giving like these, you know, giant $1.5 billion investments or grants to a company that they know is going to turn around and spend the money back to them. So it's kind of like,

It's classified as an investment on the way out, but on the way back in, it's called revenue. So it's like, you know, the revenue gets a big jump. So it's kind of in their best interest to make these deals. Some people say like, ask if it's like talking their own books, because now all of a sudden Microsoft's revenue goes up a billion dollars, but it's like a billion dollars they had, it gave away and got back again. So it's kind of interesting how that all plays out. In any case, the other thing that's interesting with this is the deal actually required reportedly, um,

between the Biden administration to actually get this solidified because of their ties to China. And so this is a big problem. The United States right now obviously is kind of in this tech AI war with China. They've made a bunch of laws where NVIDIA literally wasn't allowed to

wasn't allowed to sell the top-of-the-line chips to different companies in China, so they had to give them a lower version. China and NVIDIA kind of found some workarounds with software and AI, actually, to essentially get some of the same results from their older chips. But I think this is a really interesting thing because obviously the United States is very focused on this. I'm not sure...

exactly what level of an impact this will have because there's always going to be this cat and mouse game and workarounds and China's going to build their own, uh, their own chips. So the United States has said, this is kind of a national security issue, right? They're like, we need the best AI. We need the best technology for our military. So we're not beat out by a foreign adversary, but there's like a lot of different interesting, um,

dynamics that go into this. So all that to say, the Biden White House had to approve this deal reportedly. And along with that, there was a couple of things that G42 had to do. So one of them was they had to agree to removing Huawei as being one of their technology providers. Huawei went through this whole thing, I believe under the Trump administration, where they were about to roll out 5G cell phone towers and technology globally. And P

People had a lot of suspicions. Well, pretty much it's, you know, owned by the Chinese state government, a large portion of it. And I mean, a lot of companies and big companies in China are. That's kind of how China works. But they were concerned that there was going to be backdoors and spyware built into a lot of this technology so that, you know,

essentially the Chinese government could surveil. And so, you know, a lot of countries, the United Kingdoms and a bunch of other countries were like, hey, we're banning Huawei because from, you know, core infrastructure because of this. And it appears that the United States is still kind of in this war with Huawei where they're like, look, we'll give you, we'll let you get this $1.5 billion investment. You got to cut Huawei out of it because I don't know, it's a security issue or something. So that's kind of interesting.

Um, in addition, they have to adhere to a bunch of different security arrangements that are essentially protecting the AI products. Um, because I think, uh, one thing that they're concerned about is, um,

is IP theft, right? So, you know, let's say they develop a really powerful AI tool and it had like, let's say a backdoor built in, in the hardware through Huawei. And then someone was able to go in there, grab the IP, grab the, let's say the, the weights and the models and some, you know, some of the trading data, et cetera. This could be problematic. And I guess for the United States, they're concerned about that. So that was the deal.

In all of this, I think right now Microsoft is unlocking access to a huge amount of money in the Gulf region. I mean, they're giving them $1.5 billion. And I think that that company is going to be a big AI player. So it's going to be interesting to see where that goes.

The UAE right now is really pushing to become a major player in the AI industry. So why does all of this matter? What's going on here? What's the big deal with this? I think right now, this whole deal is, it kind of reads like your typical strategy investment. But I think with all of the geopolitical stakes in this, it's quite a big deal. Right now, I think with G2, the US is creating a new kind of blow in its efforts to limit China's access to...

essentially have an influence in this whole new realm of AI that's coming out right now. I think they're getting a big new partner in the Gulf region. So this is kind of a big deal for AI moving beyond just being in the United States. And so it seems like they're kind of picking their enemies and their partners, right? They're like, we don't like China, but like we like the Gulf state. So it's interesting to see where this goes. And I think it has a lot of implications there.

Now, what I did want to read you is what exactly G42 does. A lot of people actually don't know. And while, of course, they're a big company evidenced by the fact that they're, you know, taking on a $1.5 billion investment right now, this isn't something that is... It's not a company that a lot of people actually know about. So it's not super, you know, it's not super common. I want to read you exactly what they do from their website. So on their website, they say...

G42 is a global leader in creating visionary artificial intelligence for better tomorrow. Okay, very generic. And I'll tell you why it's generic. It's born in Abu Dhabi with a global footprint. We champion AI as a powerful force for good, a tool to improve every aspect of life, a complement and enhancer to humanity rather than an antagonist to it. Okay, so I think the moral of the story from that is like they're kind of like accelerationists instead of decelerationists. They view this as a positive impact. They're not concerned about the negative impact. They're just like,

this is going to be good for humanity. So that's their stance on this. And I think that's kind of important to know based off their thesis. And, you know, it's interesting because not every AI company has the exact same stance on that. So it's interesting. They say, we are an agent of progress in the region and beyond and join forces with nations, corporations, and individuals to discover what will propel humanity forward from molecular medicine to space travel and everything in between. Together at G42, we're on a mission to invent a better everyday. So

The reason it's kind of hard to nail down exactly what they do is because they actually invest in a ton of different companies. They own a ton of different companies. They do a lot of stuff. It's like, it feels like

It's less so in the United States, but in other countries, there's kind of like some of these like mega corporations that do like a ton of stuff. And it feels like, you know, they probably got like some great contracts with the government in Abu Dhabi and like some of the higher up people there. So it feels like it's kind of like one of those companies where they're like, look, we need to compete with the United States. We're going to put all the resources into this one big company and try to like crush it. Seems like they're trying to do. On their website, it says they have 20,000 employees. They've written 30 or over 300 research papers on

by their scientists and engineers. They have seven companies that are actually like an operation right now, which is interesting because like you don't necessarily need to do that. You have opening eye who's got like opening eye, Dolly, Sora, and technically those are all the same

So if they have seven different companies, they could be doing drastically different things. So anyways, I think this is very interesting. They talk a lot about all of that. And I think this is going to be a really big play in kind of the advancement of AI globally beyond just the United States. It's going to be a big play in Abu Dhabi and the Gulf, I think,

They're really ramping up and this is kind of proof. You're starting to see these like token companies raising big funds in other countries. We had Mistral in France and now this is kind of the next one, I think, in a new country. So it's exciting to see and we're excited to continue to cover everything that's going on globally. If you enjoyed the podcast,

episode today. Make sure to subscribe on YouTube. Make sure to follow us. Leave us a review on Spotify and Apple Podcasts, wherever you listen to your podcasts. Leave me a review, leave me a comment, subscribe. I really appreciate it. And I hope that you all have a fantastic rest of your day.