Musk-Trump Alliance Has Gulf Wealth Funds Eyeing More US Deals

(Bloomberg) --In the weeks leading up to the US presidential election, one of the United Arab Emirates’ most influential royals met with Elon Musk. Days after the results were clear, the head of Saudi Arabia’s Public Investment Fund was pictured alongside Donald Trump and the Tesla Inc. chief who helped put him in the White House.

For those at the top echelons of Middle East finance, like the UAE’s Sheikh Tahnoon bin Zayed Al Nahyan and Saudi Arabia’s Yasir Al Rumayyan, Musk’s presence in Trump’s inner circle presents a significant opportunity, people familiar with the matter said, declining to be named discussing confidential information.

In his first term, Trump oversaw a strengthening of US ties to the oil-rich region where he already had strong business connections. Gulf funds are increasingly optimistic that the addition of Musk to the mix will help them win even more deals in the US, the people said — particularly in sensitive areas like technology and artificial intelligence, where the Biden administration placed heavy restrictions.

A key reason is the wealth funds’ links to Musk, who’s set to jointly helm Trump’s Department of Government Efficiency. Al Rumayyan helms the $925 billion PIF, which was among backers of Musk’s xAI in a previous funding round, an investment that hasn’t been publicly disclosed, according to a person familiar with the matter. Qatar’s wealth fund is also reported to be committing money to a more recent round.

The PIF also owns a chunk of Kingdom Holding Co., a firm run by Prince Alwaleed bin Talal that was among Musk’s biggest backers when he took Twitter Inc. private and separately backed xAI. The $510 billion Qatar Investment Authority was also an investor in the Twitter deal, while Sheikh Tahnoon’s $245 billion conglomerate in 2020 bought a controlling stake in a fund that backed Musk’s SpaceX.

Many of these entities have previously also worked with Trump’s son-in-law, Jared Kushner. His Affinity Partners drew $2 billion from the PIF, as well as investments from sovereign funds in Qatar and the UAE, Bloomberg News has reported.

“President Trump’s reputation as a businessman who loves dealmaking presents an easier case for regional enthusiasm,” said Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington. “The Trump brand is a familiar one across the Gulf. Trump’s business profile aligns nicely with the business-first foreign policy approaches adopted by most Gulf governments over recent years.”

Oil-rich Gulf countries — together wielding about $4 trillion in sovereign wealth — have sought to bolster their expertise in technology and become global hubs for AI in order to cut their reliance on revenue from crude. Some of those ambitions have been hampered by regulatory pressure from the Biden administration, which has been concerned that sensitive US technology could reach China as Middle Eastern nations build closer ties with the Asian country.

The Committee on Foreign Investment in the United States has reviewed several multibillion dollar deals from the Gulf on national security concerns, Bloomberg News reported last year. Against that backdrop, Abu Dhabi AI firm G42 has pared back its presence in China and pushed into key Western markets. The firm, which Sheikh Tahnoon oversees as chairman, has been at the forefront of the UAE’s push into AI and has businesses spanning everything from cloud computing to driverless cars. Microsoft Corp. invested $1.5 billion in G42 this April.

A UAE official said that Emirati investments in the US exceed $1 trillion and both countries have committed to deeper collaboration in areas like tech and AI.

Meanwhile, last October, the Commerce Department added much of the Middle East to chip export restrictions that originally focused on China and a handful of other foreign adversaries. That’s meant companies like Nvidia Corp. have needed a special US government license to ship cutting-edge semiconductors to countries such as Saudi Arabia and the UAE.

To be sure, Trump has yet to name many key advisors and his policies will become clearer only in time. He’s shown himself to be unpredictable when making decisions, according to people familiar with the matter, who also said Gulf states could be disappointed if they end up having disagreements with the new president over the Iran-Israel conflict.

The president-elect may also be reluctant to allow a loosening of restrictions on the most sensitive areas like chips, given his aggressive stance on China. Some executives and bankers, meanwhile, noted that the dealmaking environment for Middle Eastern funds was improving even before the elections.

And despite their work with Musk, some in the region have have had fractious relationships with him, though ties have since improved.

For now, Gulf funds know that to please Trump, they’ll have to show more commitment to investments in the US and promise to commit capital into most initiatives the incoming president wants them to back, according to people familiar with their thinking. They’re also keenly aware of the need to keep a lower profile on China deals to avoid antagonizing Trump, one of the people said.

Most regional wealth funds are already heavily skewed towards investments in the US. While they have been trying to re-balance portfolios toward Asia, that process may slow as they look to demonstrate their commitment to investing in the world’s biggest economy.

Some of them are also led by executives with a deep understanding of the US market, like the QIA’s Mohammed Al Sowaidi who helped establish the fund’s office there. Qatar’s rulers are “possibly anticipating the dynamics of a Trump presidency,” said Salar Ghahramani, a SWF expert at Pennsylvania State University and the founder of Global Policy Advisors.

Saudi Arabia’s PIF also sees the US as a key partner for transforming the kingdom’s economy, and is already working on a host of potential investments in America. There’s optimism in Riyadh that an incoming Trump administration could halt a senate investigation into the PIF’s investments in the US, as part of which lawmakers there have been trying to get Al Rumayyan to testify in person.

The PIF chief has previously golfed with Trump wearing a MAGA hat and, at the UFC event, Al Rumayyan was among the only outsiders sitting with Trump’s group. He was seen deep in conversation with the president-elect and the two were later spotted smiling and taking selfies on the Saudi executive’s mobile phone.

Trump support could also come in handy for Riyadh as it tries to finalize a proposed $1 billion deal between PGA Tour Enterprises, a new for-profit entity established to attract external funding, and the PIF.

The incoming president has a long history of building warm ties with Middle Eastern countries. He and Crown Price Mohammed bin Salman have frequently praised one another in public, and Saudi Arabia was the first country Trump visited when he became president in 2017.

Under Joe Biden, the bilateral relationship initially soured over the president’s criticism of the kingdom over the 2018 murder of Washington Post columnist Jamal Khashoggi at the Saudi consulate in Istanbul, although ties improved later.

Soon after Trump was re-elected, MBS, as the Saudi crown prince is known, expressed his joy at the Republican’s return to power in a late night call, Bloomberg News reported at the time.

Meanwhile, Eric Trump is due to speak at a Bitcoin-related event in Abu Dhabi next month. In an interview prior to the US elections, the president-elect’s son said his father “loves” the UAE and intends to visit the country if he wins.