Sovereign funds turn to energy security as AI drives demand

• 89% prioritising energy security
• 70% increasing infrastructure spend
• Private markets remain attractive

Middle Eastern sovereign wealth funds plan to spend more on projects that strengthen energy security and infrastructure as artificial intelligence drives power demand, new research shows.

Nine in 10 (89 percent) of state-backed funds in the region now rank energy security among their top investment priorities, according to Invesco’s annual Global Sovereign Asset Management Study. That is higher than the global average of 80 percent.

Every fund surveyed said private markets offer attractive long-term returns, while 70 percent plan to increase their spending on infrastructure projects over the next year.

The Gulf region is home to some of the world’s biggest state-backed funds, including the $1.13 trillion Abu Dhabi Investment Authority, the $1.1 trillion Kuwait Investment Authority and Saudi Arabia’s $900 billion Public Investment Fund, according to the Sovereign Wealth Fund Institute.

Invesco conducted interviews between January and March with 90 sovereign wealth funds and 54 central banks worldwide, with a combined $29 trillion in assets.

While the report did not provide details about the investments linked to energy security, 70 percent of Middle East funds said a top priority was to put more money into infrastructure such as utilities and power grids.

The report said the AI boom and buildout of new energy-hungry data centres in the region would increase the need for both energy and critical infrastructure schemes.

• The war that exposed the Gulf’s infrastructure vulnerabilities
• Why Gulf data centres can no longer remain invisible
• Middle East energy infrastructure gets $1bn boost

Every Middle Eastern fund surveyed said AI would have a “transformative” impact over the coming decade (compared with 77 percent globally), while all said they were already using AI in their own investment processes.

Josette Rizk, head of Middle East and Africa at Invesco, said: “What stands out is the clarity of regional priorities, with energy security, infrastructure and private markets forming the backbone of long-term strategy, alongside a strong conviction in the transformative potential of artificial intelligence.”

The Organisation for Economic Cooperation and Development has previously warned that the effective closure of the Strait of Hormuz for several months this year due to the Iran war could affect data centre projects in the Gulf.

The Invesco report also found Middle East central banks continue to build gold holdings as they seek to diversify reserves. Six in 10 have increased gold allocations over the past three years and half expect to buy more, citing global volatility and gold’s role as a safe-haven asset.