Reinventing Industries

Wa’ed Ventures’ Mohammed Bakhsh on why Saudi Arabia is betting on artificial intelligence

By Megha Merani

There’s change afoot in Saudi Arabia- the Kingdom is making a dramatic transformation with it moving away from its traditional energy empire, and instead striving to become a leading character in the global artificial intelligence (AI) race.. But the shift is more than just a strategy within its economic diversification plan; it’s also a blockbuster move that could redefine the Gulf state’s global identity.

“The country is effectively on rocket fuel for AI innovation,” says Mohammed Bakhsh, Investment Manager at Wa’ed Ventures, the $500 million innovation-focused venture capital fund backed by Saudi Aramco. “On one hand, [Saudi Arabia] is undergoing a rigorous economic diversification exercise, leaning heavily towards technology. The way we view it, AI’s role isn’t just about automation, it’s about reinventing these industries. It’s about revolutionary changes.”

“Saudi Arabia aims to become a regional hub for AI, not only by developing domestic AI capabilities, but also by attracting international tech companies and experts to collaborate and invest in the Saudi AI sector,” Bakhsh says. “The success of Saudi Arabia’s long-term adoption of AI lies in the strong establishment of a reciprocal global-local stream. Entrepreneurs aiming to shape the local AI market in the long run should focus first on developing localized solutions that can be adapted across industries.”

Amidst the national push towards technological innovation, Wa’ed Ventures has also positioned itself as a catalyst for the country’s AI ambitions and been channeling capital into AI startups, signaling the fund’s foresight in leveraging cutting-edge technology. Its early AI application investments include Elevatus, an AI-powered human resource and talent management solution, Twinn Health which offers computer vision powered magnetic resonance imaging (MRI) analysis, Tenderd, an AI platform to convert data from equipment into actionable insights, and Intella which is a data-tech, Arabic speech to text startup.

 The VC fund was birthed from oil giant Aramco’s entrepreneurship center that originally provided end-to-end support to early-stage entrepreneurs in the early 2010s. Today, it is one of the most active investors in the region with more than 50 portfolio companies, and is investing in the next generation of transformative startups that are taking advantage of disruptive technologies. By investing in AI startups, Aramco not only taps into innovative solutions for energy efficiency and operational excellence, but also positions itself at the forefront of the AI revolution.

 “Wa’ed Ventures’ approach to investing in AI is based on studying the implications of AI adoption in the region and assessing market readiness for these products, which in turn affects our investment returns in these companies,” Bakhsh says. “Our early investments in AI have largely been in the AI applications layer, but we’ve also invested in the infrastructure level, which are basically startups the support the entire AI space rather than a specific application or vertical. We are also very keen on exploring investments in technically differentiated foundational level AI tech, or companies that build the models the industry depends on.”

 Wa’ed has also aimed to support AI companies with more deep tech strategic applications. Examples of this include SpiderSilk, a cybersecurity threat detection and management platform utilizing AI, which closed a $9 million funding round in 2023 led by Saudi fund. The move comes as Saudi Aramco CEO Amin Nasser’s has been calling for globally recognized standards and regulations to match AI’s rapid evolution, highlighting the critical need to shield businesses from security threats. He warned the Global Cybersecurity Forum last year that the energy sector is vulnerable to attacks, particularly with the advent of new technologies such as generative AI. Saudi Aramco was the victim of one of the biggest cyberattacks in 2012 that threatened to shut off 10% of global oil supply. Today, Aramco’s new supercomputer, Dammam-7, is among the top 10 supercomputers in the world, and the most powerful in the Middle East, managing some of the largest proven global reservoirs.

 Meanwhile, Wa’ed has also invested in infrastructure plays that support the wider AI space such as PASQAL, a French-based quantum computing startup localizing their technology to Saudi Arabia to support critical AI infrastructure, which will empower any data-tech based startup. “The introduction of quantum computing has the potential to revolutionize AI outputs by enabling faster and more efficient processing of complex algorithms, leading to advancements in problem-solving tasks,” Bakhsh says. “As a leading Saudi-based investor, [we are] committed to the localization of technologies. This includes both investing locally and supporting world-class tech to migrate to Saudi Arabia to introduce their cutting-edge technologies to the local market and sharing knowledge with local talent.”

 He added that AI startups targeting the Kingdom enjoy an “unparalleled advantage” when it comes to early-to-market trial testing, owing to expansive governmental support for emerging and disruptive tech. “The unique opportunity for AI startups in Saudi Arabia is effectively the speed at which the Saudi ecosystem is developing,” Bakhsh says. “We remain highly optimistic about the AI sector as both founders and regulators continue to navigate use cases and applications. We are making a public announcement to the global startup community that we are willing and ready to empower AI-related startup efforts targeting Saudi Arabia. We want to see more technically differentiated efforts, and our team is diligently looking at emerging startups to help make it happen.”

 Strong government support for technological advancement is one of the characteristic elements of the Saudi entrepreneurial landscape, Baksh notes. Saudi also achieved a global second-place ranking in societal awareness of AI, as per Stanford University’s International Index for Artificial Intelligence. However, despite having strong AI applications such as the energy industry, Bakhsh said the universal nature of AI tech means that talent alone will effectively make a difference.

 “The establishment of authorities such as SDAIA, however, and other government initiatives is encouraging, but the challenge is legitimate,” he says. “Early adoption of AI innovation in the region does not mask the fact that, on the whole, the lack of specialized local talent still compromises the market-readiness for such solutions. Our startup sector is still in the nascent phase when it comes to deep tech and AI innovation.” One reason for this, Bakhsh explained, is the fact that the entrepreneurship scene in the region is still being built, starting by digitizing the traditional sectors such as logistics, banking services and consumer services.

 “The market is yet to invest heavily in deep technical talents and products, which is a long-term investment and a long-term return strategy,” he says. “Naturally, this became reflected in the regulatory environment where there seems to be a consensus that the number of new homegrown AI models is still too rare to create a true need for regulatory programs like sandboxes.” In the future, however, given the country will maintain investments in AI technology and talent, Bakhsh believes there will eventually be unique opportunities, “even beyond those in Western states which had a head start to create players such as OpenAI.” OpenAI is the leading AI company recognized for its pioneering work in Large Language Models (LLMs) with ChatGPT.

 “Ultimately, Saudi Arabia aims to be a pioneer in the AI space, to push the boundaries of cutting edge AI research,” he says. “The long game for AI in Saudi Arabia is ultimately in foundational AI tech, which is basically developing the technology infrastructure behind market-dominating AI models such as ChatGPT and Gemini. While such companies monopolize the space right now, open-source software have proliferated the market and will eventually allow for a more democratized AI tech ecosystem. Current achievements in the Saudi AI ecosystem are AI applications that lean heavily on these models developed by the likes of Google and open-source iterations; but in the long term, Saudi Arabia’s investment in top local and global talent will lead to us building globally competitive foundational AI tech.”

 As Wall Street’s AI obsession moves to new heights, the quiet but evolving narrative of Saudi Arabia’s bridge between oil and innovation is certainly going to be one to watch.