Riding the A.I. Wave, Saudi Arabia’s Sovereign Fund Continues Its Ambition in Silicon Valley
Saudi's sovereign wealth fun is developing partnerships with major U.S. private equity and venture capital firms.
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Saudi Arabia continues to lurk as a dominant force in Silicon Valley. This year, it is developing a $40 billion A.I.-focused fund with the venture capital powerhouse Andreessen Horowitz and making a dozen other investments in prominent VC funds and startups. The kingdom’s presence in the U.S. tech sector came under scrutiny in 2018 after the murder of the American journalist Jamal Khashoggi. The U.S. and other Western nations tied the crime directly to Saudi Arabia’s de facto leader, Crown Prince Mohammed bin Salman Al Saud. Soon after the incident, then U.S. Treasury Secretary Steve Mnuchin, Uber (UBER) CEO Dara Khosrowshahi, then World Bank president Jim Yong Kim, JP Morgan CEO Jamie Dimon, and many other esteemed finance and technology leaders announced they would be boycotting the Future Investment Initiative conference in Saudi Arabia, an international business event dubbed the “Davos in the Desert.”
However, in 2023, Sanabil, the venture capital arm of the Saudi sovereign wealth fund, the Public Investment Fund (PIF), updated its website to boast capital allocations in American private equity giants like KKR, General Atlantic and Bain Capital. Sanabil also disclosed investments in 40 U.S. venture firms, including Andreessen Horowitz, Coatue Management, Insight Partners and Founders Fund, but did not reveal the nature of its partnerships or investment sizes. According to the SEC, PIF owns roughly $20.6 billion in U.S. equities as of the first quarter of 2024.
If the Saudi government’s $40 billion A.I. fund with Andreessen Horowitz, which The New York Times reported in March might fall through, does come to fruition, it will be far more significant than typical amounts raised by U.S. venture capital firms and establish PIF as a major player in the fast-growing A.I. sector.
Saudi’s nearly $1 trillion sovereign fund swung to profit in 2023
Behind Saudi Arabia’s dazzling investments and ability to lure leaders worldwide is its nearly $1 trillion PIF the fifth largest in the world. In 2023, PIF boasted $25 billion in profit, further cementing it as a global pit stop for fundraising. PIF’s assets under management have grown steadily over the years, more than doubling between 2018 to 2021. The Middle East’s largest sovereign wealth fund, the Abu Dhabi Investment Authority, also experienced a decline in its annualized returns in 2022.
The nature of Sanabil’s relationships with its U.S. partners remain unclear. Per Pitchbook, Sanabil is listed as a limited partner of Andreessen Horowitz and Coatue Management but has not made capital commitments since March 2017. Sanabil is not listed as an LP of Founders Fund, Bain Capital (BCSF), General Atlantic, KKR or Insight Partners on Pitchbook.
Saudi Arabia’s expansion into Silicon Valley was spearheaded by Yasir Al-Rumayyan, the governor of Saudi Arabia’s wealth fund since 2015. Shortly after taking the helm, the fund invested $3.5 billion in Uber, considered among the most trail-blazing startups of the time, and Al-Rumayyan joined the ride-hailing company’s board. Saudi Arabia slowly became a major player in the U.S. startup scene, with Sanabil investing in Bird Scooters, Credit Karma, Reddit, GitLab and the A.I. startups Vectra and Atomwise. In October 2018, the Saudi sovereign wealth fund supplied nearly half of the capital for SoftBank’s $100 billion Vision fund, which funded WeWork, Zume and other notable startups.
The kingdom has also cultivated its domestic startup scene, becoming the largest destination for VC investments in the region, outpacing the United Arab Emirates for the first time in 2023.
Saudi Arabia’s PIF has received criticism for being a soft diplomacy tool of the kingdom to improve its image through strategic investments. Outside of startups, this fund invested also heavily in LIV, which joined with rival golf league PGA in a controversial merger, along with offering inflated contracts to Christiano Ronaldo to play on a Riyadh-based team.