(Reuters) - Microsoft ( MSFT ) plans to invest $1.5 billion in G42, an artificial intelligence firm in the United Arab Emirates, the New York Times reported on Tuesday.

G42 had divested its investments in China and began the lengthy task of pulling out Chinese hardware amid U.S. concerns over its relationship with Chinese businesses.

Under the partnership, G42 will use Microsoft's ( MSFT ) cloud services and accede to a security arrangement negotiated in detailed conversations with the U.S. government, the newspaper said.

G42 will also be able to sell Microsoft ( MSFT ) services that use powerful AI chips, the report added.

The agreement places a series of protections on the AI products shared with G42 and includes an agreement to strip Chinese gear out of the Emirati firm's operations, among other steps, the NYT said.

Microsoft ( MSFT ) President Brad Smith, who will take a seat on G42's board, was quoted by the paper as saying "the U.S. is quite naturally concerned that the most important technology is guarded by a trusted U.S. company".

Microsoft ( MSFT ) and G42 did not immediately respond to a Reuters request for comment.