The Scene
ABU DHABI — Courtney Powell, chief operating officer of venture capital firm 500 Global, recalled an idea that a fellow investor recently floated: What if a Gulf state like Saudi Arabia or United Arab Emirates created a “special economic zone” in which copyright doesn’t exist?
The lack of a copyright law would allow AI companies to train powerful models without worrying about lawsuits from book publishers, musicians and others who claim their work was ripped off by the technology.
Powell, who was visiting from her home in Riyadh and has helped seed a growing ecosystem of startups there, wasn’t endorsing the idea. And there’s no indication that the leaders of the UAE would entertain the concept.
The suggestion, though, highlights an increasingly common perception among some in the tech industry that the United States is coming down too hard on new developments like crypto and AI, and risks hurting innovation.
Meanwhile, Powell said the Gulf region has become an increasingly attractive place for startup founders from all over the world, from South Korea to Latin America to Russia. There were 79 venture deals in Saudi Arabia and the UAE in 2015, according to PitchBook. That number reached 402 in 2022 before dropping slightly last year to 337.
As the UAE and Saudi Arabia build out their data centers capable of training and running powerful AI models, the region could be seen as an attractive refuge for smaller startups that are overburdened by the uncertainty of regulation in places like the US and the EU, she said.
To be sure, the UAE has its own regulations, but the centralized power of the Emirati leadership has made the rules more straightforward and easy to adjust when necessary.
The country has also created several special economic zones, or “sandboxes,” where startups can experiment freely with new technologies, from autonomous vehicles to healthcare to crypto.
In this article:
Know More
American entrepreneurs and investors have been particularly vexed by the US’ stance on crypto regulation. Rather than create clear guidelines, lawmakers have opted to leave it up to the Securities and Exchange Commission to apply existing laws to the industry, creating uncertainty and spurring many crypto companies to move outside the US.
The crypto industry believes the SEC has focused on the scams and high-risk speculation associated with digital assets, rather than the technology’s potential.
In the UAE, both Dubai and Abu Dhabi have embraced the technology, turning the regions into hubs for crypto innovation.
The UAE has also embraced AI. In 2017, it became the first country in the world to appoint a minister for AI and undertook ambitious efforts around data center construction and other AI infrastructure.
One of the biggest hurdles for the country’s AI ambitions is US regulations that prohibit the export of advanced chips without a license. Semafor reported Wednesday that the US government is moving closer to approving an export license for Saudi Arabia. It’s likely the UAE falls into that category.
And on the state level, there have been 420 proposed AI bills as of May. By far the most controversial is California’s SB 1047, which has drawn fierce criticism from opponents.
But two other bills moving through California’s legislature could pose even more of a challenge for AI startups and have gone largely unnoticed. AB 2013 requires AI models released after 2022 to disclose summaries of training datasets, including copyright information and details on the training process.
And SB 942 requires AI providers over a certain size to make watermarks and free detection tools to let users check if content was generated by their platform.
Reed’s view
My trip last week to Riyadh and the UAE was eye-opening. As I wrote last Wednesday, Saudi Arabia is making huge strides in its fast-growing tech scene and Riyadh will attract more talent as it modernizes and relaxes strict laws like the prohibition of alcohol.
And my day in Abu Dhabi Thursday was equally interesting. Building and infrastructure projects are everywhere.
Its kinetic expansion stands in stark contrast to San Francisco, the epicenter of the AI boom that has put its tech scene at risk with runaway crime and an inability to build new housing. And the state has done little to mitigate those issues.
But the US still has something the UAE doesn’t, which is an unparalleled volume of brainpower across science and industry, and a history of invention and opportunity that attracts droves of talented immigrants who replenish that human capital. That’s why the US can afford to have more stringent regulations, and I wouldn’t bet against the engine of American innovation.