Abu Dhabi's BlueFive Capital to Pull Back From AI, Warning Most Start-Ups Will Fail

"I suspect we will take a back seat when it comes to AI investing," Hazem Ben-Gacem told AGBI on the sidelines of the Gateway Gulf investment conference in Bahrain. "It's too high-risk."

The comments stand out because they come from a Gulf investor, in a region whose governments and funds have been among the most aggressive backers of AI. The International Monetary Fund estimated that Qatar, Saudi Arabia and the UAE committed $120 billion to AI investments in 2025, mostly in data centres and other infrastructure, and Gulf money has backed Anthropic and Elon Musk's xAI. Abu Dhabi's technology investment fund MGX took part in OpenAI funding rounds in 2024 and 2025.

Ben-Gacem, a former co-chief executive of Bahrain-based Investcorp, founded BlueFive in Abu Dhabi in late 2024. The firm manages about $15 billion across private equity, real estate and financial services, and its holdings include Kling AI, Origen Technology, carmaker Bugatti Rimac and UAE transport businesses.

He told AGBI the AI boom resembles the dotcom bubble of the late 1990s, when about $5 trillion in market value was wiped out as speculative internet valuations collapsed. He expects a similar shake-out, predicting that roughly 5,000 of an estimated 6,000 AI start-ups worldwide will eventually fold, leaving about 1,000 survivors.

"Right now you have a business risk, an industry adoption risk but also a capital markets risk," he said.

Mo Gawdat, the former Google executive who advises Gulf governments, made a similar case to AGBI, saying the sector is in a bubble that could burst next year. "Most of the investment is leveraged in ways that can take the entire market down with it," he said.

The warnings arrive in a week when capital markets have turned against AI. The Nasdaq Composite fell 5.5% on Thursday as investors worried that Democratic gains in the US midterm elections would bring tighter rules on AI and data centres, and Asian chip stocks extended the losses on Friday. Anthropic, which had been targeting a valuation of about $1.5 trillion for a listing planned for the week of November 16, is facing pressure from prospective investors to lower it.

Other Abu Dhabi investors are still adding exposure. Alpha Dhabi Holding agreed in October to put $1 billion into Alpha Wave III, a fund managed by New York-based Alpha Wave Global that will invest in AI and high-growth technology companies. Earlier this week, OpenAI chief executive Sam Altman met Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan at the ADIPEC energy conference ahead of the signing of four documents covering government, energy and investment.

Ben-Gacem did not say whether BlueFive would sell any of its existing AI holdings, or how much it would cut back new commitments.