Google parent Alphabet and Aramco are in talks to build a tech hub in Saudi Arabia: WSJ

  • Saudi Arabia's state-owned oil company Aramco and Google parent Alphabet have entered talks to create a joint venture that would build data centers in the kingdom, the Wall Street Journal reports.
  • Saudi Crown Prince Mohammed bin Salman is spearheading an effort to diversify the nation's oil-dependent economy, and technology is a focus.
  • A network of data centers could provide the backbone for a burgeoning Saudi tech industry.
Saudi Arabia's Deputy Crown Prince and Defense Minister Mohammed bin Salman (2nd L) takes his seat to meet with U.S. Defense Secretary James Mattis and his delegation on April 19, 2017 in Riyadh, Saudi Arabia.
Jonathan Ernst - Pool | Getty Images
Saudi Arabia's Deputy Crown Prince and Defense Minister Mohammed bin Salman (2nd L) takes his seat to meet with U.S. Defense Secretary James Mattis and his delegation on April 19, 2017 in Riyadh, Saudi Arabia.

Saudi Aramco, the world's largest energy company, and Google parent Alphabet have entered discussions to create a technology hub in Saudi Arabia, the Wall Street Journal reports.

The kingdom is embarking upon an ambitious plan, led by the 32-year-old Crown Prince Mohammed bin Salman, to diversify the nation's oil-dependent economy. The foundation of the effort is a plan to create a huge sovereign wealth fund, underwritten by selling shares in the state-owned Aramco.

The initial public offering, which could happen this year, is expected to be the world's biggest-ever share sale. Aramco President and CEO Amin Nasser recently told CNBC his company is ready for the IPO this year, but is waiting on the government to choose an international list venue.

Alphabet and Aramco have discussed forming a joint venture that would build data centers around the kingdom, sources familiar with the matter tell the Journal. It remains to be seen which customers the data centers would serve and how large the joint venture would be, but it could be listed in the Saudi stock exchange, the sources said.

The talks have been ongoing for months and have involved Alphabet CEO Larry Page, the Journal reports.

Amazon, one of the leaders in the cloud computing industry, is also reportedly in the mix. Sources tell the Journal it could soon sign a $1 billion deal to build three data centers in Saudi Arabia, with the deal expected to be announced during Salman's anticipated visit to the United States this year.

Salman is the driving force behind Saudi Arabia's Vision 2030, a plan to overhaul the economy that includes a greater focus on the technology sector. A network of data centers could provide the backbone for a burgeoning tech industry in the kingdom.

The Journal notes that data centers in Europe currently service Saudi Arabia via undersea cables, an arrangement that slows down traffic.

Saudi Aramco is primarily focused on pumping oil and refining it into products like gasoline. It has plans to grow its business producing chemicals and plastics, but those are byproducts of fossil fuels.

An expansion into operating data centers would mark a significant step toward diversification.

Read the full story here.