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Microsoft invests in Arabic AI firm as U.S. tries to limit China’s sway

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Microsoft plans to invest $1.5 billion in an Abu Dhabi-based artificial intelligence company, a deal that could limit China’s influence in the Gulf region amid rising technological competition with the United States.

In a blog post Tuesday, Brad Smith, Microsoft vice chair and president, said the deal with G42 will deepen international ties for artificial intelligence while ensuring the technology follows “world-leading standards for safe, trusted and responsible AI.”

“Our two companies will work together not only in the UAE, but to bring AI and digital infrastructure and services to underserved nations,” wrote Smith, who will join G42’s board of directors.

Microsoft negotiated the deal with the U.S. and UAE governments for more than a year to ensure all parties were comfortable with the terms, according to a person familiar with the matter, who spoke on the condition of anonymity to discuss the private talks. As part of its negotiations with the U.S. government, G42 has agreed to strip Chinese gear from its operations, following concerns about its use of Huawei equipment, the person said.

AI has emerged as a flash point amid increasing tensions between the United States and China. The deal announced Wednesday positions a key American tech giant to have influence over the burgeoning AI sector in the UAE, amid concerns that China seeks to invest more in the region.

Peng Xiao, group chief executive at G42, said the deal will “significantly enhance” his company’s global presence by allowing it to build on Microsoft’s cloud infrastructure.

The two companies had already been collaborating on a smaller scale. In April 2023, they announced a joint plan to create artificial intelligence solutions using Microsoft’s Azure cloud system, and later agreed to introduce AI tools that meet the complicated security needs of government users. And in November, Microsoft made G42’s Arabic AI language model, called Jais, available on its cloud.

G42 has been subject to congressional scrutiny over its close ties to China.

In a Jan. 4 letter to Commerce Secretary Gina Raimondo published by the New York Times, a congressional committee asked her agency to consider export controls on G42 and several related companies.

In the letter, the committee states that Xiao, the G42 CEO, operates “an expansive network” of companies that support the Chinese military, and enable its human-rights abuses. It also states that Xiao served in a leadership position with Pegasus, a UAE-based spyware company that has been used to surveil political dissidents, journalists and others around the world.

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