April 16 (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.