Thiel Capital Exec Warns Markets Underpricing Middle East AI Pullback Risk

Jack Selby, managing director at Thiel Capital, warned Wednesday that markets are underpricing the risk of Middle Eastern investors pulling back from artificial intelligence, according to CNBC.

Selby said Middle East investors account for roughly a quarter of global AI investments projected over the next five years, a concentration that creates systemic vulnerability for the sector should geopolitical or economic conditions shift.

“Markets are underpricing the risk of Middle East pullback in AI,” Selby told CNBC, warning that investors have not adequately accounted for the possibility that sovereign wealth funds and regional capital sources could reduce their exposure to AI ventures.

US AI companies and startups have come to rely heavily on capital from Gulf state sovereign wealth funds including Saudi Arabia’s Public Investment Fund, Abu Dhabi’s Mubadala, and the Qatar Investment Authority. These entities have poured billions into American AI firms in recent years, participating in funding rounds for both early-stage startups and established players.

According to the CNBC report, a reduction in Middle Eastern AI investment could compress valuations across the sector and complicate funding rounds, particularly for capital-intensive AI infrastructure and foundation model companies that require billions in compute spending.

Selby’s remarks come amid broader questions about the sustainability of AI investment levels globally. While US venture capital firms and tech giants continue to deploy capital aggressively into AI, the sector’s dependence on a concentrated set of international investors represents a risk factor markets have not adequately priced, according to the Thiel Capital executive.

Selby cited potential triggers for a Middle East pullback ranging from shifts in oil revenue projections to changing geopolitical alignments to domestic economic priorities that could redirect sovereign wealth fund capital away from technology investments and toward local infrastructure or diversification projects.

For the US AI industry, which has absorbed hundreds of billions in investment commitments, a retreat by Middle Eastern backers could create a funding gap that domestic capital sources would struggle to fill in the near term, according to CNBC.