AI and Davos in the Desert
Saudi Wants To Use Its Oil Billions To Become An AI Power Player
AI and the Energy Currency
Forbes: Saudi Arabia has over the last decade used its massive oil wealth to become an important backer of technology companies. Now at the Future Investment Initiative Institute, the kingdom’s annual showcase dubbed “Davos in the desert” it made its pitch to become a major hub for AI data centers.
During FII’s opening session, Yasir Al Rumayyan, chairman of Saudi’s $930 billion sovereign wealth fund, told tech companies to build the massive data centers needed to train and run new AI systems in the kingdom to take advantage of its energy resources, global location, and available land.
“The reason why we are investing in AI is Saudi Arabia is very well positioned to be a global hub, not only a regional hub,” Rumayyan said .
The kingdom’s pitch on AI was met with a warm reception from some of the Wall Street and Silicon Valley power brokers who flew into the summit in the Saudi capital of Riyadh. “The presence of very large pools of capital, energy and the ability to build the data centers will be a key point,” said Eric Schmidt, Alphabet’s former executive chairman.
Schmidt endorsed the kingdom’s pitch noting that AI training and inference could be run from data centers based there to sidestep constraints on electricity generation and transmission in the United States. “There’s every reason to think that Saudi can become one of the big winners here if it puts the money in place wisely and quickly,” said Schmidt.
A day later, Rumayyan signed a deal with Google to bring its new AI chips to its data center in the kingdom. Oracle already has a $1.5 billion data center in the country.
The demand for energy to fuel new AI data centers projects has led to a flurry of infrastructure investments over the last year. In the United States, Microsoft announced plans in September to bring the mothballed Three Mile Island nuclear reactor back online, Amazon unveiled three major nuclear deals earlier this month, while OpenAI’s Sam Altman has reportedly lobbied for data centers so big they would have the same energy demands as 4 million homes. Meanwhile, Blackstone CEO Stephen Schwarzman warned that the demands for electricity to fuel AI compute could see electricity demand soar by 40% over the next ten years.
Saudi officials claim they can deliver power around 12% cheaper than the average 7.8 cents per kilowatt hour paid by data centers in the United States. “You are going to have the lowest-cost energy to build data centers anywhere in the world,” said Amin Nasser, CEO of Aramco, the world’s largest oil producer.
Nasser said that the kingdom could deliver electricity at 4.8 cents per kilowatt hour from gas, or $6.80 from renewable energy sources. “They have to come to Saudi Arabia to do green data centers,” said Nasser.
Delivering on the kingdom’s pitch hinges on another ambitious target to build 130 gigawatts of renewable energy by 2030, — the equivalent of two-thirds of Germany’s current total wind and solar infrastructure. Saudi only had around 2.5 gigawatts of solar capacity built as of last year, according to BloombergNEF .
The kingdom’s AI ambitions could also see it jostling with its oil-rich neighbors in the Gulf. Notably Abu Dhabi has its own ambitious AI plans that are being led by its state-owned AI group G42, a new $100 billion AI investment fund, and a smattering of smaller labs and companies.
The two Gulf nations however face the same bottleneck in access to advanced chips from American companies like Nvidia. The Biden Administration has imposed export controls on the graphic processing units (GPUs) used to run the calculations powering AI, fearing they could be resold to China. Microsoft invested $1.5 billion into G42 in April as part of a deal to end any cooperation with China, while the head of Saudi’s top research university last week pledged to stop any projects that could offer China any access to U.S.-made chips, according to the Financial Times.
One major AI project not discussed at the summit was a reported $40 billion investment fund to be run by the PIF with venture capital investors Andreessen Horowitz. The PIF disclosed last year that it had invested in A16Z funds.
My Comment: The Era of Massive Bankrolling and the Sea Change
Forbes: Saudi officials have signaled that the era of bankrolling massive external projects like anchoring nearly half of SoftBank’s $100 billion vision fund in 2016 could be over for now. Oil prices stuck at $80 per barrel over the last year, and flagging overseas investment, have blown a $32 billion hole in the kingdom’s budget and led to spending on mega projects like the futuristic city of Neom reportedly being dialed back.
The PIF’s Al Rumayyan also said that international projects like stakes in foreign investment funds would now make up a smaller slice of its overall spending. This could fall to as low as 18% from its current level of 21% but a marked drop from its peak of 30% in 2020.
Even so, around 8,000 people flocked to the annual summit in Riyadh drawn by the billions of dollars that the Saudi wealth fund has splashed on fund investments, with startups like electric car maker Lucid and AR company Magic Leap, sports events like LIV Golf and Newcastle United Football Club. “People used to come to us and ask for money,” Rumayyan said on October 29. “We now see a shift from people wanting to take our money to people wanting to co-invest.”
The theme of AI intruded into many of the discussions at the summit held at Riyadh’s glitzy Ritz-Carlton hotel. A trio of clunky robots that appeared at past events were retired in the name of AI avatars that at times haphazardly hijacked the mic to fact check and hector the bigwigs and powerbrokers on stage with lines apparently regurgitated from a large language model. “I think they have lost control of the avatar that’s kinda concerning,” said CNN’s Anna Stewart moderating a panel with three billionaires. “No, she’s late to the game. There is a need for humans on a panel!”
Continued With The American Alternative
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