AI startups test the waters in Saudi Arabia’s tech push 

Saudi Arabia’s artificial intelligence companies could contribute $135 billion to the economy by 2030, exceeding government forecasts

Lured by generous housing allowances, free office space and potential government partnerships, startup founders are increasingly looking at Saudi Arabia as a home for their emerging artificial intelligence companies.

DXwand, a Cairo-based startup that uses conversational AI to help businesses automate customer service, is taking full advantage of Saudi largesse and now operates out of an office in Riyadh. SambaNova, a Palo Alto, Calif.-based chipmaker, is still testing the waters, recently sending two employees to scout potential commercial partnerships and land deals.

The incentives are especially attractive for larger companies such as Vast Data, a $9.5 billion maker of software to manage AI’s massive data storage demands. Having already established a strong presence in the Middle East market, Vast Data is moving its regional headquarters from Dubai to Riyadh – and reaping dividends.

“Our relocation wasn’t just about moving offices; it signified a strategic shift,” Abdullah Al Gallaf, Vast Data’s Country Manager in Saudi Arabia told The Circuit. He pointed to Saudi Arabia’s ambitious Vision 2030 and strong commitment to funding technological advancement as key drivers for the change of HQ.

Vast Data is part of a wave of companies moving to the kingdom to expand their business, a phenomenon that Saudi Crown Prince Mohammed bin Salman is banking on as the government pour billions of dollars into efforts to make them happy.

The campaign to attract international businesses carries a carrot and a stick. Large companies that do not establish a regional headquarters in Saudi Arabia are barred from receiving government contracts under a law that took effect at the beginning of this year. Goldman Sachs last month became the first Wall Street investment bank to obtain a license to set up a Riyadh HQ.

Incentives for promising startups are spelled out in the kingdom’s National Strategy for Data & AI, which aims to create a $20 billion AI sector through private and government investments by 2030. Alat, a new Saudi tech fund backed by the Public Investment Fund, has pledged to invest $100 billion to develop partnerships and build advanced manufacturing capabilities in the AI sector.

“By establishing our headquarters in Saudi Arabia, we’re not just moving offices, we’re moving closer to the action,” Al Gallaf said. “This physical presence allows us to foster partnerships and actively contribute to the kingdom’s vision for the future.”  

Saudi Arabia’s Ministry of Investment offers a smorgasbord of inducements for foreign companies with its new Regional Headquarters (RHQ) program. Those include unlimited visas for employees, a 10-year exemption from so-called Saudization requirements that encourage hiring local employees, exemption from professional accreditation for employees with valid home-country accreditations, a zero-percent corporate income tax, and a withholding tax rate for 30 years after the RHQ licence is issued.

“Streamlined business regulations and strong support for research and development have been a major driver,” Al Gallaf said.

AI-driven companies are particularly sought by the kingdom, which offers comfortable housing allowances and free office space as bait. New government-backed investment funds and a dedication to building state-of-the-art infrastructure is aimed at supporting the emerging startup ecosystem.

Saudi Arabia’s AI sector has the potential to contribute $135 billion to the Saudi economy by 2030, exceeding the Vision 2030 forecast, according to global professional services firm PwC.

“We see immense potential to contribute to the kingdom’s technological leap, particularly in sectors like healthcare, finance, and logistics, where AI-driven solutions can significantly improve efficiency and outcomes,”Al Gallaf said..

The company’s partnerships with local entities like MBUZZ, a Saudi distributor of tech tools and software, and collaborations with Nvidia, Google Cloud, AWS and Hewlett Packard Enterprise, “significantly expand our footprint” across the kingdom, Al Gallaf said.

That includes partnering with public institutions such universities and government agencies, which, based on the new headquarters law, are only open to Vast Data because of its move to Saudi Arabia.

DXwand founder and CEO Ahmed Mahmoud told The Circuit he opened the office in Saudi Arabia to gain “strategic advantage, access to a burgeoning market, and the opportunity to contribute significantly to the region’s transformative vision.”

Mahmoud said the company already has partners in the kingdom such as insurer BUPA Arabia and is aiming to multiply its client base with the establishment of a local office in Riyadh by mid-year, employing 4 out of its 44 employees. DXwand raised $4 million in January to fuel its expansion.

“Saudi Arabia is developing several innovation hubs and tech cities, such as NEOM and King Abdullah Economic City, which attract top talent and foster a culture of innovation” he said. “DXwand can benefit from access to a skilled workforce and a vibrant ecosystem for research and development.”

SambaNova has strong reasons for building up operations in Saudi Arabia, even if it hasn’t established a headquarters in the kingdom yet, Senior Vice President of Product Marshall Choy told The Circuit.

“We are making a strategic investment in Saudi Arabia because the region – like the U.S. – believes AI is a strategic imperative to fuel its economic growth and become a global hub for knowledge-based innovation,” he said.

Subscribe now to
The Daily Circuit

The Daily Circuit newsletter (coming soon!) connects doers and dealmakers in the Middle East and those who care about the region from afar. Sign up today to be among the first in the know.