DUBAI (Reuters) -The United Arab Emirates and United States will invest more in artificial intelligence as part of a strategic partnership, the UAE's state minister for AI Omar Sultan Al Olama said on Tuesday.

The UAE, led by government-backed firm G42, is striving to become a global leader in AI, invested heavily in it to help the Gulf nation diversify away from oil.

The stakes have risen as neighbouring Saudi Arabia has begun pitching itself as a prospective hub for AI activity outside the United States.

"In terms of our investments, since the U.S. is now considering the UAE as a strategic partner, and the UAE is reciprocating that by considering the U.S. as a strategic partner, you will see more deals naturally," Al Olama told Reuters on the sidelines of an event in Dubai.

Microsoft is investing $1.5 billion in G42, the two companies announced last month, giving the U.S. giant a minority stake and a board seat and allowing the two to deepen ties.

As part of the deal, which the two companies said was backed by assurances to the U.S. and UAE governments over security, G42 would use Microsoft cloud services to run its AI applications.

That partnership comes amid Washington's efforts to hobble Beijing's technological advances, with the United States adding four Chinese companies to an exports blacklist for seeking to acquire AI chips for China's military.

Asked about further potential divestment of Chinese tech companies by the UAE, Al Olama said "government-to-government the UAE is a neutral country, and in that sense, we are going to be a country that allows the world to do business in the UAE".

Al Olama said a diversified energy mix, including nuclear energy, was key for attracting AI investment to the tiny Gulf country.

"We will have the ability to expand our energy infrastructure based on the need of the data centres," the minister said.

This includes discussions about small modular nuclear reactors but there were no concrete plans yet, he said.

The UAE has operated a South Korean-built nuclear plant since 2021. The country plans to also tender as soon as this year for four more nuclear reactors, Reuters reported last month, citing three sources.

On Tuesday, French Finance Minister Bruno Le Maire flagged during a visit to Abu Dhabi that Paris was open to the UAE investing in its nuclear energy industry. He also said he the two countries would sign a strategic partnership on AI.