Will AI be the next oil?

The arms race in large language artificial intelligence (AI) is heating up. Can the Gulf countries play a leading role in the sector, given the high savings, cheap energy and good political ties with the US?
The tech billionaire Elon Musk has alarmed competitors, and intrigued customers and observers, by rapidly building a supercomputer, appropriately known as Colossus, in just 120 days, in Memphis Tennessee in a new data centre. Its purpose is to power his xAI technology, and it will be of an unprecedented scale: Some 100,000 graphics processing units supplied by Nvidia.

Competitors are nervous. There is no guarantee that this formidable scaling up of computer power will give his xAI a superior edge, but no certainty that it won’t. Industry experts reckon that the tools at the rival OpenAI are currently superior, but the sheer computing muscle of Colossus may help xAI close the gap or overtake.

What does this mean for the economic world, including the Gulf? The impact of AI is already being felt, will continue and likely intensify. You could say that there has been much hype around AI, accidents such as ‘hallucinations’ in large language models and technical glitches. But you could have made similar criticisms about the aviation sector in the early 20th century – there were crashes and failed models, but it still proceeded to transform long-distance travel around the globe.

AI is at a similar stage 100 years on. And just as you need a skilled pilot for an aircraft, similar principles apply with AI. Harvard Business Review in its September-October edition refers to the development of ‘fusion skills’ – the most intelligent applications of AI in which human and artificial intelligence is most effectively combined. For example, breaking a complex problem down into sequential parts, and priming the large language model to address each challenge sequentially, beginning with the simplest, is more effective than asking it to solve a complex problem in one go. Researchers at Google DeepMind have found that this ‘least-to-most’ approach improves the accuracy of AI output from 16% to 99%.

Research by the Boston Consulting Group has found that only a minority of firms gain substantial value from AI, and that the most successful companies ensure that the people, skills and processes are optimal. This is the 70-20-10 principle: 70% of the investment is in people and processes; 20% is in technology and data, and just 10% in the algorithms. The most effective companies used AI for growth and revenue generation, not just process efficiencies.

In this rapidly developing technology, how should the Gulf countries invest and position themselves? It is likely that China and the US will remain the primary providers of AI, given the scale of the technological investment required, as illustrated by the examples of Elon Musk and his rivals.

The response of the Gulf sovereign wealth funds and other key players has been promising. Rather than trying to compete with the US and China in a direct way, they are developing strategic support roles within the existing industry, while identifying niche opportunities for growth.

Arabic language models constitute a promising industry. AI specialist companies within the region report that it costs around one third more to train an English large language model and then translate into Arabic, than to train one using Arabic inputs. Doing so can eliminate some of the western biases of English-language models.

For Gulf economies, cheap energy offers another competitive advantage in developing AI hubs. Saudi Aramco has calculated that the cost of power locally is around 13% cheaper than the cost per kilowatt hour in the US. Given the considerable computing power needed for large language models, this is significant.

Geopolitical considerations are of paramount importance. The Gulf states are political allies of the US, which does not want technological know-how falling into the hands of Iran or China. Saudi Arabia’s sovereign wealth fund PIF has announced a strategic partnership with Google Cloud to develop a specialist hub, which will be a research and education centre, including for Arabic language models, and a base for global enterprises and startups. It will be based near Dammam. This year the United Arab Emirates launched the fund MGX, totalling $100bn, with investors including BlackRock and Microsoft, dedicated to investing in AI companies.

The AI revolution is well underway, and there will be significant returns for both providers and users. So far, the key players in the Gulf have made some smart strategic calls.
The author is a Qatari banker, with many years of experience in the banking sector in senior positions.