FDI in AI-related activities saw dramatic growth in 2022 and the trend looks set to continue in 2023. Credit: Phonlamai Photo via Shutterstock.

Israel’s Economy and Industry Minister, Nir Barkat, said in a television interview on 6 June that artificial intelligence, or AI, “could be a game changer similar to what the internet did to the world”.

However, he said that in a country of just 9.4 million people, growth in Israel’s AI market will come through the global market – or, to put it another way, foreign direct investment (FDI).

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This comes as NVIDIA, the California-based chipmaker at the heart of the global AI boom, announced that it would build a Spectrum X-powered data centre in Israel in order to help solve one of the biggest AI bottlenecks – the speed at which data moves within data centres.

A report by data analytics company GlobalData, published on 2 June, found that AI-related FDI saw a massive surge in 2022, with 44% more projects than there were in 2021. Indeed, AI featured in 3.5% of all FDI projects worldwide.

Dubai, the leading destination city globally for cross-sector FDI, led the way as the largest city recipient of AI-related FDI projects. Projects in the United Arab Emirates’ commercial and financial capital included an R&D centre by Intel Corporation, an engineering hub by Eurora, and an office for India-based Bert Labs, among others.

Indeed, the report found that the hubs for more traditional FDI, such as Dubai, Bangalore, Hyderabad and Singapore, are also the key cities for AI-related FDI.

India received 122 AI-related FDI projects in 2022, with multinational companies such as ABB, Accenture, Deloitte, IBM and Microsoft announcing investments in the country.

Microsoft announced its intent to establish its latest data centre region in Hyderabad, with two facilities to be based in Mekaguda and Chadenvelly, while Irish-American company Accenture announced the creation of an advanced technology centre in the Tamil Nadu region.

India is an attractive location for AI investment due to relatively low operating costs and a large talent stock, having the world’s second-largest pool of highly skilled AI, machine learning and Big Data workers, according to research by Nasscom.

Nevertheless, the rush for talent is outstripping supply even in the world’s most populous country. According to Nasscom, there are approximately 416,000 people working in AI and data science in the country, but the industry demand is for another 213,000.

The US emerged as the primary source of greenfield AI-related FDI investments in 2022, with some 285 projects. The second and third-largest sources of AI-related cross border projects were India and the UK, with 37 and 35, respectively.

One of the biggest US-funded projects was Intel’s chip production factory, worth $17bn, to be based in Magdeburg, Germany, closely followed by another Intel chip production factory, worth $13.4bn, based in Kildare, Ireland.

Other notable AI-related US investments included a Grammarly office to be based in Berlin, and a Nautilus Labs office to be based in London.

This year looks set to be another stellar one for cross0border AI-related investments. In April, OpenAI CEO Sam Altman said that the company would aim to open an office in Japan in the near future, while Jaguar Land Rover, in partnership with Nvidia, is opening three autonomous vehicle hubs in Madrid, Berlin and Bologna. 

Meanwhile, in March, Tenstorrent, a Canadian producer of AI hardware, opened a subsidiary in Tokyo in response to the rapidly expanding AI market in Japan.