Saudi Arabia’s eagerness to diversify its economy in order to reduce its reliance on income from fossil fuel exports has been underscored by reports that the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund, is seeking to create a $40bn pot to invest in artificial intelligence (AI).
The plan, according to a report in the New York Times published in March, has resulted from discussions held by PIF with US venture capital firm Andreessen Horowitz and others on creating an investment partnership. Andreessen Horowitz, which has some $35bn of assets under management, has backed a number of well-known tech-based firms including Facebook and AirBnB, and has an extensive portfolio of investments in the AI sector.
No details have been made public of how such a fund would be structured, but the investment drive could start in late 2024 if it comes to fruition, according to the newspaper’s sources.
The development of such a fund would be consistent with remarks made by PIF Governor Yasir Al-Rumayyan in February when he told an investment event in Miami that Saudi Arabia was “fairly well positioned to be an AI hub outside of the US”, noting the country’s ability to provide the large amount of energy needed to power data centres. He said the Kingdom had the political will and the deep pockets needed to foster an AI industry.
Even in a sector already flooded with cash from investors anxious not miss out on the much-touted growth prospects for AI, a $40bn fund would make Saudi Arabia a major player in the field. It would also be likely to benefit both the country’s fossil fuels and renewable energy sectors, which are adopting AI to speed up resource exploitation, improve efficiency and help reduce emissions.
Green financing
Another source of potential investment for the clean energy sector in Saud Arabia is the country’s Green Financing Framework, unveiled at the end of March. That contains proposals for the issuance of green bonds and sukuk (Islamic finance) instruments to help finance an ambitious domestic renewable energy programme and other measures supporting the country’s net zero ambitions. This would be the first green bond issuance directly from the Saudi government, following the issue of more than $8bn of green bonds by PIF since 2022.
There is no shortage of investment required if Saudi Arabia – one the world’s biggest carbon emitters on a per capita basis – is to meet its stated climate change targets of cutting greenhouse gas emissions by 278 million tons a year by 2030 and reaching net zero emissions by 2060. This is a longer-term net zero target than that of many major economies – and a later date than the 2050 target set by neighbouring oil producer UAE. Climate scientists have called the Saudi targets inadequate, given the urgency of the climate crisis.
The Saudi government justifies its less ambitious targets by pointing to the difficulties in decarbonising an economy so heavily dependent on the oil industry, but has not ruled out bringing its net zero target forward. A successful investment strategy focused on AI could go some way to making that possible by both steering the economy away from reliance on oil production and helping to develop improved emissions reductions technology.
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