Microsoft announced a $1.5 billion strategic investment in United Arab Emirates-based artificial intelligence firm G42 — the biggest new round to go to an AI startup this year.

While Microsoft investing big in AI is nothing new — see OpenAI — the deal with G42, an AI holding company, comes with other entanglements that likely needed to be cleared before the announcement of the deal.

In a release, Microsoft says the partnership is backed by assurances to both U.S. and UAE governments in a first-of-its-kind agreement to apply best practices to ensure the secure and responsible development of AI.

It was also reported the deal followed negotiations between the U.S. and G42 to divest from China and pivot to American technology. Earlier this year, the U.S. House Select Committee on the Chinese Communist Party sent a letter urging the Department of Commerce to investigate G42.

The deal comes amid mounting U.S. concern about some Middle Eastern countries — including UAE — strengthening their ties to China.

The investment further illustrates Microsoft’s market assault to become the dominant tech power in AI. It is the third-largest investment by Microsoft into an AI company — behind only OpenAi and Cruise — per Crunchbase data.

The deal is the biggest investment this year in an AI firm, just ahead of China’s artificial intelligence startup Moonshot AI raising a more than $1 billion round.

As part of the partnership, G42 will use Microsoft’s cloud services to run its AI applications.

More cash

While the G42 deal was the big news of the day, a U.S.-based startup with ties to generative AI also grabbed some headlines.

Santa Clara, California-based chip startup Rivos raised more than $250 million in a Series A-3 funding led by Matrix Capital Management. The company develops power optimized chips targeting the data analytics and generative AI markets.

Of course, chip startups have seen increasing interest of late. Late last month, optical interconnectivity startup Celestial AI raised a massive $175 million Series C led by Thomas Tull’s US Innovative Technology Fund.

Also last month, Astera Labs — a developer of data center connectivity technology with use cases in generative AI — soared after its initial public offering on the Nasdaq. Shares have since then remained well above their IPO price.

Related Crunchbase Pro list:

• Microsoft’s AI Investments

Related reading:

• Chip Startup Celestial AI Lands Massive $175M Series C
• Astera Shares Soar Following IPO

Illustration: Dom Guzman