As the global race for AI dominance intensifies, Middle Eastern nations are putting more capital into developing the technology, and startups are reaping the rewards.
The region saw a record number of VC deals for generative AI startups in 2023, according to PitchBook data, with 39 rounds closing for a combined $415.1 million. Although funding levels dipped in the first three months of 2024, dealmaking has remained resilient, with deal value registering above historical norms.
Given the relative size and maturity of its VC market, Israel has naturally accounted for the largest share of generative AI investment in the region. The country is home to startups including large language model developer AI21 Labs, which closed a $208 million Series C in November.
However, the wider region has also seen an increase in appetite for generative AI investments, spurred on by a surge in adoption among companies and consumers. According to a study from Boston Consulting Group, the Middle East is leading the way for AI investments, with 93% of executives stating that they would be investing more in 2024—a higher percentage than Europe and North America. The Middle East is also above the global average for training workers on generative AI tools.
The region has also seen strong government support of AI as countries seek to diversify away from oil. Saudi Arabia is planning to create a $40 billion fund to invest in AI and has even considered creating its own AI companies, according to a report from The Wall Street Journal. The United Arab Emirates has established a dedicated council for AI innovation and aims to become a global hub by 2031.
Corporations are also increasingly looking to the Middle East for AI. Last month, Microsoft announced a $1.5 billion investment in UAE-based G42. As a result, the companies are establishing a $1 billion fund for developers to support the expansion of the region’s AI workforce and talent pool.
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