Economy

PIF renews focus on domestic investment and AI

October 30, 2024, 8:00 AM

PIF governor Yasir Al-Rumayyan at the Future Investment Initiative. He said the fund is reducing foreign investments and increasing AI spend

PIF refocusing on AI
Foreign investment down to 18%
Target of AI as 12% of GDP

Saudi Arabia’s Public Investment Fund is planning to reduce its foreign investments to around a fifth of its total assets under management, as it focuses on domestic funding and artificial intelligence, its governor said on Tuesday.

“Initially we had less than 2 percent of investments internationally, that was with $150 billion assets under management,” Yasir Al-Rumayyan told a roundtable at the Future Investment Initiative (FII) in Riyadh.

“Then it increased from 2 percent to 30 percent. Now our target is to bring it down to 18 to 20 percent.

“Having said that, the absolute dollar amount is still growing. It was a rollercoaster down and up and down as a percentage, but the dollar amount is increasing,” he said, noting PIF’s assets under management are now around $930 billion.

Saudi Arabia is hosting its eighth FII where global finance leaders, tech entrepreneurs and politicians are meeting in the shadow of regional conflict between Iran and Israel, and a US election on November 5 that could return former president Donald Trump to power.

The kingdom this month revised its foreign direct investment numbers upwards with new methodology, doubling the FDI inflow figure for 2023 to $25.5 billion.

Saudi Arabia has a target of $100 billion in annual FDI inflows by 2030 but low numbers have put extra pressure on PIF to fund its $1.25 trillion economic development plan.

Al-Rumayyan said PIF – which is leading Saudi Arabia’s economic development plan as the owner of the Saudi giga-projects – is now focused on artificial intelligence and joint ventures as part of a drive for the country to become a global economic power.

Saudi Arabia wants AI to account for 12 percent of its GDP by 2030, the government has said.

“Saudi Arabia stands as a super connector with its unique resources and strategic geographic location,” Al-Rumayyan said.

“AI alone could add $20 trillion to the global economy by 2030. By 2027 AI’s role as an economic driver will become a benchmark of national power.”

“The reason we are investing in AI is that Saudi Arabia is very well positioned to be a global hub, not only a regional hub, for many reasons.

“One, there is very efficient utilisation and low cost of energy. Two, massive lands. Three – it’s not only fossil fuels we have – we have most of the technologies in renewable energy.”

Saudi Arabia risks becoming caught up in US-China rivalry over AI. The Biden administration last year expanded curbs on the sale of Nvidia chips to Middle East countries.

The US ban has included Nvidia’s advanced graphics cards, though there is speculation the bans could be lifted.

“The relationship between China and the US is on everybody’s minds and it impacts all economic policy decisions,” said Laura Cha, senior advisor to the Hong Kong Exchange’s board.

“It affects a lot of decisions nowadays and the US election will have a big impact on that as well.”