Saudi Arabia’s AI Bet: Diversifying Beyond Oil

When Saudi Arabia enters the conversation, its vast, oil-fueled wealth immediately springs to mind. However, the kingdom is strategically steering its ship towards a more diversified horizon, aggressively expanding into sectors like Artificial Intelligence (AI), tourism, and sports.

Khalid Al Falih, Saudi Arabia’s Minister for Investment, revealed that over half – precisely 50.6% – of the Saudi economy is now “completely decoupled” from oil. This marks a significant departure from the historical dependence on hydrocarbons.

“This percentage is growing,” Al Falih told CNBC, emphasizing that while government revenue was once almost entirely derived from oil, now 40% originates from sectors and sources “that have nothing to do with oil.” This shift underscores the tangible progress of the Saudi Vision 2030, an ambitious plan to reduce the kingdom’s reliance on oil.

“We’re seeing great results, but we’re not satisfied. We want to do more. We want to accelerate the kingdom’s diversification and growth story,” he added, signaling an unwavering commitment to economic transformation.

Saudi Arabia is placing significant bets on high-growth sectors, particularly artificial intelligence. Al Falih stated the kingdom’s intention to be a “key investor” in developing AI applications and large language models. Furthermore, Saudi Arabia aims to establish data centers “at a scale and at a competitive cost not achieved anywhere else,” potentially leveraging its substantial energy resources to power these facilities.

“AI has emerged [in] the last three, four years, and it’s definitely going to define how the future economy of every nation. Those who invest will lead, and those who lag behind, unfortunately, will lose,” he pointed out, highlighting the crucial role of AI in shaping future economic competitiveness. This positioning aligns with projections estimating AI could contribute over $135 billion to the Saudi economy by 2030 (PwC).

The Kingdom’s recent quarterly budget performance report confirms this trend. Total government revenue for the first half of 2025 reached 565.21 billion Saudi riyals ($150.73 billion), with oil revenue constituting 53.4% of the total, a decrease from 67.97% during the same period in 2019. This represents a structural shift, indicating successful implementation of diversification strategies.

In 2024, Saudi Arabia reported a 1.3% rise in full-year GDP, predominantly driven by a 4.3% increase in non-oil segments. Conversely, oil activity experienced a 4.5% year-on-year decline, further solidifying the narrative of a diversifying economy.

The Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, has been instrumental in this diversification, actively acquiring stakes in tech giants, video game publishers, and sports franchises. These strategic investments aim to leverage oil revenues to secure a foothold in burgeoning sectors.

Addressing concerns about the impact of declining oil prices on the Saudi economy and government revenue, Al Falih assured that the country is not curtailing budgets or reducing public spending. This confident stance is supported by the strategic fiscal management implemented under Vision 2030.

While oil prices have indeed seen corrections in 2025, with Brent crude spot prices dropping by 13.4% year-to-date (FactSet), and Saudi Arabia’s oil revenue experiencing a 24% decline in the first half of 2025 compared to the previous year, the government’s commitment to strategic investments remains firm.

Al Falih also highlighted the sixfold growth of the PIF since its inception and the deployment of nearly $1 trillion in capital across strategically significant sectors. The PIF’s strategy focuses on long-term value creation, contributing to the overall resilience of the Saudi economy.

Tourism is emerging as another pivotal growth engine. Ahmed Al-Khateeb, the country’s tourism minister, stated that the sector’s contribution to GDP rose from 3% in 2019 to 5% in 2024. Investment in tourism infrastructure is substantial and continues to develop.

“We are [opening] resorts, new airlines, new airports, and the numbers are growing, and we are focusing on countries and visitors that are coming from outside to experience our great culture,” Al-Khateeb stated, underscoring the kingdom’s efforts to attract international tourists and diversify its tourism offerings.

The tourism minister expressed confidence in the sector’s potential to contribute 10% of GDP by 2030, with a long-term target of 20%. This ambitious goal reflects Saudi Arabia’s intent to establish itself as a prominent global tourism destination.

“This 20% will help Saudi Arabia to diversify the economy and make it more sustainable,” he concluded, reiterating the crucial role of tourism in achieving the kingdom’s broader economic objectives.