Alterra's investments designed to hedge against AI bubble, says chief executive

Alterra, the UAE's $30 billion climate vehicle, has designed its artificial intelligence investment strategy to protect it against a much talked about bubble in the sector, its chief executive has told The National.

The fund's focus on investing in energy systems powered by AI and not directly into the technology is serving as a “hedge” against any potential bubble that may burst in the booming industry, Majid Al Suwaidi said.

“We're investing in the only place that our portfolio touches the AI story – through the energy systems. What is great with our investment thesis is that we don't invest directly in AI infrastructure,” he said in an interview.

“Those energy systems, regardless of whether it's powering AI or powering a factory, homes, schools, or hospitals, that power will still be needed. So, in a way, Alterra and the investments we make are a really good hedge against a bubble in AI.”

Mr Al Suwaidi's comments come as Abu Dhabi-based Alterra gives a vote of confidence to the technology by investing in one of Europe's biggest sovereign AI companies.

On Monday, Alterra announced that it had partnered with Milan-based Domyn to develop a proprietary climate intelligence system that the former will own and control, which will pave the way towards becoming an AI-native company, Mr Al Suwaidi said.

“Once we've built that core system, we can then extend that to other aspects of the business and truly become an AI-native organisation,” he said. The system, which will be developed in phases, will “come into the fore” next year, he added.

“To pick up these technologies and apply them very early in our development means that we will be able to use AI or our analytics to … take advantage of the power of this technology.”

Alterra did not disclose the value of its investment in Domyn, which was formerly known as iGenius and founded by former Apple employee Uljan Sharka.

Domyn has raised $1.1 billion in debt financing over the past two years and is valued at about $2 billion. In June, the European Commission chose Europa, a project led by Domyn, to develop an open-source AI model covering all 24 official languages in the EU.

“The way we're designing the system is that it can be evergreen in the sense that as new models are being built or as new developments happen within the technology that they can be plugged in immediately and we can upgrade our system,” Mr Al Suwaidi said.

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The partnership with Domyn mirrors his confidence in the AI sector, where the bubble debate is hot. Recently, two of the biggest names in asset management, Citadel chief executive Ken Griffin and Blackstone president Jon Gray, gave negative and positive views, respectively.

Mr Al Suwaidi acknowledged that there is a bubble “in some ways”, but managing expectations and doing due diligence to make sound investment decisions will help contain potential ill-effects.

“Any time you have a new asset class, a bubble is developed … and bubbles can be good if managed and bad if they burst … it just remains to be seen how long it will continue to grow and whether we can manage it in a prudent way so that it doesn't burst with negative consequences,” he said.

“We know for sure that this technology is going to be critical to our future economic development, and how we use it becomes increasingly important, and we're discovering that, so there's going to be winners and losers in that process.”

Alterra's mandate is to raise $250 billion globally by 2030 to create a fairer climate finance system. Its chairman is Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc.

It is less than three years since Alterra's launch at the Cop28 climate conference hosted by the UAE. Since then, Alterra has grown into three funds – Acceleration, Transformation and Opportunity – with five global investment partners: Brookfield Asset Management, BlackRock, Copenhagen Infrastructure Partners, KKR and TPG.

It also has more than 60 direct and indirect portfolio companies across more than 40 countries, supporting more than 100GW of renewable energy capacity.

Alterra's capital activity is also accelerating. More than $51 billion in expected equity capital across its fund and co-investment activities has been mobilised, with preliminary mobilisation ratios of more than 10 times for its Acceleration Fund and over four times for the Transformation Fund, excluding Alterra's own capital and deal-level debt.

Recent investments also show the breadth of Alterra's expansion, including Inkia in Peru, Wireless Logic alongside General Atlantic, and Jeppesen ForeFlight with Thoma Bravo.

“What Alterra has shown through our success in the climate realm is that you can achieve the same goals, but in an economically prudent way,” Mr Al Suwaidi said.

“Something that is very unique, and very underreported is how successful we've been in our model.”