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Saudi invests $7bn in US giants from Microsoft to Starbucks

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Saudi Arabia’s sovereign wealth fund continued its massive investment in US equities in the second quarter of 2022 despite global recession fears.

At a time when the kingdom’s income from oil almost doubled, it snapped up $7.6 billion of stocks in technology, e-commerce, retail and finance companies – from Microsoft and Amazon to Costco, Starbucks and Home Depot to JPMorgan Chase.

The Public Investment Fund (PIF) took new stakes in 17 companies, bringing the value of the fund’s total investments in US equities in Q2 to $41 billion. 

“Regional sovereigns and private institutions are flush with liquidity just as international asset prices are crashing, presenting a window of opportunity to further bolster GCC wealth by securing high quality assets at discounted prices,” said Huda Al-Lawati, founder and CEO of GCC-led private equity firm Aliph Capital.

The PIF, which manages more than $620 billion in assets globally, invested $464 million in Google parent company Alphabet, $507 million in the video conferencing company Zoom, and $474 million in Microsoft. 

PIF’s largest US investments in Q2
Home Depot$450m
JPMorgan Chase$434m
Booking Holdings$373m

The PIF lies at the heart of the kingdom’s Vision 2030 plan to diversify the Arab world’s largest economy and reduce its reliance on oil. 

It aims to more than double the value of its assets under management to $1.07 trillion and to commit $40 billion annually to develop Saudi Arabia’s economy until 2025.

It is pursuing a two-pronged strategy: building an international portfolio of investments while also investing locally in projects that will help to reduce Saudi’s reliance on oil.

The fund has created 10 new sectors, set up more than 30 new companies, created 331,000 jobs in Saudi Arabia and more than tripled its assets in the past few years. 

In the third quarter of 2021 PIF tripled its US-listed equity holdings to $43.4 billion, from $15.9 billion the previous quarter, according to a regulatory filing to the US Securities and Exchange Commission last November.  

The fund made 15 new investments including stakes in electric car maker Lucid Group, payments firm Visa, logistics company Fedex, supermarket giant Walmart, and industrial supplier Air Products & Chemicals. 

By December the value of PIF’s US-listed stocks had reached $56 billion, driven in part by gains made by Lucid since its initial public offering on the Nasdaq stock exchange last July.  

The Kingdom’s investment in electric vehicle company Lucid Motors got off to a rocky start

PIF invested a reported $1 billion in California-headquartered Lucid in 2018 and increased its stakeholding to 62 percent in February this year. It also owns a 3.75 percent stake in ride-sharing company Uber Technologies. 

Its holding in Lucid was valued at $38.6 billion in December, up from $25.8 billion three months earlier, according to a February SEC filing cited by Reuters. 

However, shares of Lucid have tanked this year as the company grapples with rising raw material costs, supply chain delays, and inflation.  

Lucid slashed production targets as a result, potentially derailing its plans to distribute thousands of electric vehicles to Saudi Arabia under a deal struck in April. 

At the same time US stock markets have suffered the worst first half of any year since 1970 as the Fed substantially tightens monetary policy to fight rising inflation.   

Overall, PIF has reduced its US equity holdings since the start of 2022 by 22 percent from $56 billion to $43.6 billion by the end of the first quarter of 2022, an SEC filing in May showed. 

The fund cut its stake in Visa, Plug Power, Prologis and Walmart, while raising its stake in five companies – Take-Two Interactive, PayPal, Alibaba, Farfetch and Pinterest – and investing in five others.

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