Innovation The Ultimate Asset

Hi guys and welcome to this panel called innovation the ultimate asset. I wanted to start with an open question to all three of you. If innovation is the ultimate asset, what kind of innovation is going to help the Middle East reach its full potential? Is it mindset, policy or market structure or something completely different? Maybe your royal highness you'd like to start.

Sure. Alhamdulillah. Thank you very much for having me. It's an absolute pleasure being back in ADFW. Um, I honestly think that the Middle East needs to focus on uh the business of the Middle East need to focus on a lot less um of replicas from Silicon Valley companies and more on the on the constraints that we have here in the environment and our environment at least, food security um um harnessing um energy as it should be, AI obviously and infrastructure.

We have a large probably unbanked um um um population that I think need to be served. I think these fintech plays really need to play a bigger bigger role here rather than having the next um um food delivery company or anything with all respect to the other ones. But the end of the day, we need to focus on the issues that we have at hand. Uh and I think it's happening pretty fast, but I don't think it's happening to the rate and and the scale that we needed to happen. That's my point of view.

I see. And maybe Jenny, you can come in here. What do you think is holding the Middle East back to its full potential?

Well, so I think it's all those things, right? And I think that um you know, innovation takes creativity and it takes capital. Uh as I've said to my colleagues in Europe, you know, I bet there's a lot of really smart entrepreneurs in Germany, France, the UK, and other places, but why do they go to the US uh to go build their companies? Because it's about policy. it's about um the the environment and I think in the Gulf region you've got so many of those things.

I think that the the one opportunity is on the one hand there's a great tailwind with the visions and the plans that are laid out. Um the other hand we need to get deeper capital markets to to attract that capital in and there's some structural things that I think moving towards that need to happen that will help improve it. So I think from our our standpoint uh what innovation needs to be done is around two big themes. One is what we call global resilience where each region needs to build strategic autonomy in the key industries. And the second is using AI so you can actually build these companies to be on the right side of history.

And our view is and this applies to every part of the world today. How do you build companies that first and for foremost drive resiliency in your core markets? Financial services, healthcare, energy, defense, industrials. And I think for uh the region, what you have to think about is build companies locally that can actually be leaders in driving that strategic autonomy for uh the region and then do it in a way that you can over time also be globally competitive. And that's really how you can create a hub around financial services or hub around energy.

uh in the region

and we're talking about innovation and I think we can't not talk about AI and there's been much said about AI. Your Royal Highness, you've spoken quite enthusiastically about AIdriven leaps in diagnostics and healthcare. I'm curious to get your point of view on are we in a AI bubble at the moment and what's different from the dotcom bubble or the sort of 2021 VC runup?

Sure. there. Um, that's a large onion to peel. So, if you excuse me if I take it a longer time, but I'm sure uh you're going to hit a lot of these notes. Also, I think there's a huge difference between what happened in AI bubble and what happened now.

I think the AI bubble had a different elements going on for it going against it. Uh, you had higher valuations with very little um relative to 12 months trailing earnings trailing. So, you had a huge discrepancy over there. this. You don't have this right now with at least with with the companies that matter.

So, we're looking at Nvidia, we're looking at Microsoft, we're looking at Meta, we're looking at Google, we're looking at companies that have substantial cash flow that can literally back uh their their projected growth. Now, whether that applies to Open AI or not is a different subject. I think um I think a trillion dollar valuation um inevitably is is overvalued when it comes to a company that can generate 13 billion now, 20 billion uh soon and maybe 50 billion later in the middle of next year. But I think the scale of how AI is moving um also um contradicts that AI bubble um narrative. Right.

You had the SCA um realization of revenue right now um relative to capex happens not instantaneously but happens really really quickly. You did not have that in the a in the.com bubble. You had a huge lag from the AI from the um um com bubble in 2000 all the way to 2007 2006 is when you really realized the potential of of um of of the internet and how it really impacted our lives. With AI, you have e exponential um um um changes between one model to the other from one quarter to the the other let alone one week to the other.

Um and the realization of that is quite instantaneous. So you have all these factors playing in. I don't think it's an AI bubble per se, but I think few companies that aren't necessarily in the um that cannot back their their their valuations with proper um um revenue growth are definitely going to be the ones that actually feel it the most.

So I I agree with his excellency or his highness. Um the one thing I would say is maybe just to say it a different way like when people even ask the question I always think to myself it's kind of like who cares right so so there's seven stocks we're talking about one of the greatest technological changes in our lifetime and it's a bit like saying if the picks and shovels got really expensive there's then then there's no point in the in the gold mine or the gold rush like we haven't even begun to see the impact of AI across most sectors I mean, companies are trying to figure out how to use it. Its pace of innovation is astonishing. Uh, and that's not I don't think that's built into people's stock prices yet, and frankly, it'll probably take a couple of years before it really becomes transformative and meaningful in earnings for companies.

I see. So, you're still quite enthusiastic. Um, he I'd be curious to get your view. I think in the past you've said that bubbles are a good thing. Do you still hold that view?

And what is your view on the stock market at the moment?

Look, I'm in venture capital. We live for bubbles because this is when you organize talent and capital uh behind important themes and you get important companies to get created on the other side. Now bubbles are very stressful because what happens is the sheer size of the opportunity is so large that lots of capital floods in and decisions have to get made fast uh because there's fear of missing out and everybody's deploying capital fast. So there's a lot of mistakes but that does not mean that you don't create a lot of economic value on the other side of it. If you look at the AI bubble what's happening today you have three pretty profound uh AI companies that have moved the needle forward.

You've got OpenAI which started it all. You have Anthropic who are large investors in anthropic and Google uh which has gone and really ver vertically integrated and seems to be doing extraordinarily well at the moment. So what what's happened is next to it because those are such fast uh accretion of value scenarios there's a lot of fear of missing out. So a lot of researchers are getting funded with big dollars very uncomfortable amount of money in the hopes of creating next breakthroughs in AI. I think that part of it is very very hard to see what's going to happen to that deployment of capital because these are not really commercial teams.

A lot of them are research teams and you're waiting for scientific breakthroughs which may or may not happen and the dollars are really really high. So all the attention and nervousness is because of that. But on top of it the applied AI layer we were thinking a lot about how do you diffuse technology into society. I would actually say this is the year where diffusion actually started. We're building a lot of companies that are on the ground bringing AI into enterprises and starting to see that work faster and faster and actually show economic ROI early days.

And that part of it I don't see stopping because there's economic arguments for why businesses are going to transform. And that part of it is to me feels like just the beginning of a what I think will be a pretty interesting cycle for us.

And if you don't mind me just adding two two more cents to this. So we haven't even scratched the surface of what AI can do. Robotics hasn't even come into play. Self-driving cars haven't even started. Uh wearables haven't even started.

All those need all all the compute in the world. We have a we have so much demand um that we have so much demand that the supply isn't good enough. But not important more importantly than that the energy to supply all the demand isn't there yet. So there are bottlenecks obviously and I think we're going to live through this in the next 24 months at least to actually realize the full potential of the of of AI. But more importantly, what happens when that inflection point happens?

What happens when AI becomes a little more than a really really intelligent goldfish and turns into actual AGI and ASI? What happens to this displacement of millions of workers in Philippines in in in India or in the call centers for example? They don't need that anymore. You can literally take out millions and millions of people just to save uh for the bottom line. So it'll be very cost effective.

But more importantly, you have to have governments come into play. And unfortunately, you have to um companies are not going to self-regulate. They're not going to self-govern themselves. So, you have to have some sort of regulation that at least protects people from this enormous displacement that's going to happen. Now, I say this knowingly that when the um when the car was introduced, people were displaced.

Horse carriages and builders were displaced and they were um and they found something else to do. But you're going to have a a period of time where where people are going to get displaced and they're going to need to find new things to do. AI can help them do that. But that interim time is going to be super painful.

Yeah.

And you have to have a solution for that.

Interesting.

That's much more important than an AI bubble for me. We can survive in AI bubble.

Yeah. It's a really exciting technology and we're here in Abu Dhabi that is a big investor into AI. Jenny, I'm curious. How can investors protect themselves if there is a big market correction in terms of portfolio construction or other methods? Is there any way to protect against it or can you expect the worst?

I always say, you know, it's amazing. It always comes back to the same basic tenants. Diversification of a portfolio, understand your risk. Can I like I was talking to some people about private credit and I said, you know, you can be worried about private credit, but but everybody lumps private credit into one category and into an alts portfolio because it has one characteristic that's like the rest of alts. It's actually much more like your fixed income portfolio.

And you would never look at your fixed income as one big broad investment category. You're going to sit there and say, "Is investment grade looking attractive now? Is high yield? Is assetbacked? Is real estate?"

like and you need to be able to you know look at the underlying risks of portfolio. So I'd say you one is don't try try to time the market diversification you know all those sort of basic things are the best way to protect yourself and I I tend to think that 2026 the US economy is you know any indication I think it's going to be pretty strong through 2026 I think there's a administration highly motivated to keep it strong at least through the midterms next November so you know you stay in the market but stay diversified because we never know when that black swan comes in

and are there attractive sectors to invest in outside of AI if we did want to diversify into perhaps real estate infrastructure

I mean right right now real estate debt is a great category in the US why because the regional banks that were all lending there actually are not lending any longer and so it's created this dislocation in the market like but but your job as an investor it's also why I believe you it's not a part-time job is to find those dislocations in the market there's always something there.

Yeah. And he I want to bring in the VC angle here. How do you sort of when you when you're looking at opportunities to invest in, how do you try and find opportunities that are truly institutional and will be here for the next 10 to 20 years and not just a here today gone tomorrow investment?

Well, if I was being very honest, you actually don't know in the beginning a priority what's going to be a 10 to 20 year journey versus not. So I think what you're really looking for is you know founders that uh have a core insight uh that they believe in and you sort of think about is the timing right to take on that project and then you have a lot of ambiguity to navigate right I mean so much needs to happen in the markets technologies in the world of AI it's very magnified because it this has happened a few times now where AI models have come they've built a new capability founders start building on top of that and then what happens is the new models get released that have new capabilities and new founders come and build on the same things. There was almost a second mover advantage today uh because the the technology is so ambiguous and changing so fast and so just thinking through when's the right time to engage uh and are the founders building with long-term considerations but knowing full well that a lot of these don't make it. I mean if you think about how many technology companies have become independent large cap uh uh you know businesses over the last 15 years not that many right you would sort of say you know Meta's gotten there over the last 20 years you've got you know Stripe you've got maybe some emerging ones like in profici not that many and so you're looking for those founders that do want to take make those long-term bets and build with those considerations while being highly highly urgent in uh winning the short term as I see. And I want to switch to talk about blockchain and tokenization.

Jenny, you've you've spoken a lot about this in the past. To me, it seems like it's relatively naent and uptake is quite uneven globally. What's standing in the way of it really taking off and being used all around the world?

I'd say there's probably four things, four big things that I think are um slowing it down a bit. One is there is this concept of permissionless where people worry about is this just you know a a mechanism to do money laundering right so it's the KYC AML component of that that you have to ensure that the tokens are going into qualified wallets second thing is um look it's been a really tough regulatory environment I mean credit to to the UAE and the ADGM who created a lot of clarity which is why you see uh blockchain firms setting up here But you know you really need a more global coordinated regulatory environment. So that there needs to be some work there and obviously the US has got much more constructive on it but it was difficult. I'd say the third thing is um this this is a challenge to a lot of business models. There's a lot of business models that gets disrupted by this.

Uh and um I think that they they're going to be naturally motivated to slow it down because it will um and I I know it because I've talked to some who said, you know, don't let atomic settlement, we don't have the infrastructure. That's be a challenge. Um and so they'll try to slow it down. And then the final thing is there's actually not legal clarity around smart contracts as much as there should. So, it's great you can program into the token the smart contract, but you also have to know that you have all the regal legal rights to that and that hasn't yet been tested.

And so, how far are you willing to go if you're not 100% sure about the legal rights there? But I I would say water runs down a hill. This thing is coming. The efficiency of this software, there's plenty of blowups that will happen to crypto companies. That's a different thing.

But this this technology is is absolutely coming to replace the rails in financial services

and he do you share that enthusiasm around?

Yeah. So look, so we're in we were early investors in stripe which is doing a lot on the blockchain side with tempo. uh we incubated circle uh with their arc protocol and then we've also done prediction markets like poly market and kry and uh if you think about the reason blockchain technologies were created it was for trust and a lot of the early work was how do you sort of determine trust in the financial markets uh you think about circle stable coin a lot of what's going on I think the next 15 years for blockchain are super interesting because if you believe the adoption of AI is going to happen rapidly then what's what's the missing ingredient when you think about the implementation of AI, it's all about trust. You know, are the agents doing the right things? Are there nefarious activities, deep fakes?

How do you really know what's real, what's not? So, you you're going to need to be able to implement trust digitally if your AI is going to actually be deployed at scale. And this the very purpose of blockchain is to go enable that. So I think there's going to be a lot of new applications that get emerged uh uh to solve a lot of these problems

and I I wanted to sort of switch track a little bit and in in the final few minutes of this discussion and your Royal Highness through Arada you're buying into London property at a time of potentially weak sentiment and high interest rates. What is what are you seeing in the data that kind of makes you so bullish on the UK property market? See, London's fundamentals haven't changed. They just gotten cheaper. And this is what we see right now.

Uh there's there's overregulation. Sure, there's the high interest rates. Uh there's a few issues here and there, but end of the day when everybody when everybody is leaving, this is the opportunity for um people like us at least to actually see there's a real opportunity then. And we saw a beautiful opportunity. I mean, there's a reason why London um is still has still the um the infrastructure needs that it needs.

There's huge housing prices that it needs. You know, nobody nobody can argue that um London there's a constraint in housing and it's it's there's no supply. These are fundamentals that we look at and we see them as being attractive. More importantly um if you look at the the company and how Arada is um is is structured uh we have centralized procurement we have um so many um um um tens of billions of actually of of of product that we're going to be we're going to be um sorry tens of billions of value that we're going to be releasing to the public very soon when it comes to um Sharah Dubai Abu Dhabi Saudi Arabia very soon um Sydney the UK. All of that we can centralize procurement so they can we can cost we can cut costs significantly.

More importantly we have global cross-elling people in people in Sydney want to live in London. People in London want to live in Sydney and people in the UK want to live in both sorry people in the G in the GCC want to live in both places or have a place there. So at least we have centralized procurement. we have a global reach and we have a global network of investors that we can easily tap into and and and really go into these these markets in a strong way and we believe in London you know when when you see a downturn happen in Lond when you see what's happening in London right now which is a downturn um at at at the the easiest definition of the words I see an opportunity there and we definitely saw it that's why we got we have we have our partners that we um we bought Regal and right right now that's why we uh we're announcing maybe every every month a new project over there. I'm really excited about the growth in London that will that that's going to happen the next five, seven years and we're here for the long term.

We're not here for a quick turn around and leave. We're in London for at least the next 1015 years.

Interesting. And are there any other property markets that you find appealing? Um obviously we've spoken about London. Are there any other countries geographies that you think are exciting? I mean, look, Saudi Arabia has Saudi Arabia is a sleeping giant right now.

And we see a huge need because there's maybe 2 million uh houses that need to be built there. And 100% the uh the um the local developers are not going to be able to fulfill it. And if they do fulfill it, I think Saudis are fed up from the cookie cutter um um um um approach that the um local developer has. And and God bless them. But the end of the day, we we believe that we have a different product to give.

We've we we're in talks with about five or six um um um entities. I'm not going to be too specific on that, but five or six quite large entities and we think we're going to we're going to be inking a deal hopefully in Q1 2026. And then obviously then Saudis Saudi is there for the taking. It's it's a huge market. The US really does look good to us.

The housing market over there, there's a huge need for housing. So the hu So we're looking at Miami, we're looking at Austin, we're looking at Nashville, we're not looking at necessarily the California, not necessarily looking at New York, but definitely the southern areas.

Exciting.

That is all we have time for and thank you for attending this panel on innovation, the ultimate asset. Thank you.

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