IntroductionMicrosoft announced a $1.5 billion investment in G42 – an Abu Dhabi based Artificial Intelligence (AI) company – earlier this month. The deal was the out

Microsoft announced a $1.5 billion investment in G42 – an Abu Dhabi based Artificial Intelligence (AI) company – earlier this month. The deal was the outcome of several meetings between US and UAE companies – which have been brokered by the US government. G42 is chaired by Sheikh Tahnoon bin Zayed – National Security Advisor of UAE. Microsoft will be granted a minority stake in G42 and the Microsoft President 

 will join the board of directors of G42.

“Both companies will move forward with a commitment to comply with US and international trade, security, responsible AI and business integrity and regulations”

“Our two companies will work together not only in the UAE, but to bring AI and digital infrastructure and services to underserved nations.”     

Microsoft’s investment is significant for several reasons. First, UAE has been laying significant emphasis on AI (Artificial Intelligence). A strong reiteration of this is MGX – a fund dedicated to AI deals. In 

, UAE became the first nation to appoint an Artificial Intelligence Minister. Earlier this year, in February 2024, the UAE had come up with a $500 million program with a thrust on Research and Development (R and D) in the AI sector. The UAE government’s 

The US has been uncomfortable with UAE’s growing linkages with China. In 

,  a construction inside the Khalifa Port -- 

 – UAE’s capital -- being built by China, was halted due to US pressure. Washington had stated, that a military facility was being constructed within the port. One of the major bones of contention between the US and UAE has been the latter’s growing links with Chinese tech giant Huawei. The US has flagged its security concerns, on more than one occasion, regarding UAE’s Huawei links. In 2021, UAE suspended talks with the US for the purchase of 

. While the UAE had said that US conditionalities were tough to adhere to, US had said that UAE’s use of Huawei’s 5G technology could result in sensitive information being leaked to China.

The UAE on its part has emphatically reiterated the point, that it will not be forced to make a choice between US and China. UAE had also said that Huawei was a cost-effective option.

More recently, US Commerce Secretary Gina Raimondo 

“ "When it comes to emerging technology, you cannot be both in China's camp and our camp,"

 “For better or worse, as a commercial company we are in a position where we have to make a choice. We can not work with both sides. We can’t”

It would be important to point out here that UAE is unlikely to follow all conditions laid down by the US

Earlier this year Mike Gallagher, the Republican chair of the House Select Committee on the Chinese Communist Party, had flagged the links between G42 and China’s state entities. He had also said that Peng Xiao is linked to several Chinese companies which—dual use technologies 

"Without restrictions on G42, the hardware and software developed by these U.S. companies are at significant risk for diversion to G42's PRC-based affiliates,"

The recent decision of Microsoft to is important but a few points need to be born in mind. While this clearly has a strategic imperative from the US perspective, the UAE will not want to view it from a zero-sum perspective.

UAE-US cooperation in AI and the China factor

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