DUBAI  - 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 told Reuters 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 US is now considering the UAE as a strategic partner, and the UAE is reciprocating that by considering the US as a strategic partner, you will see more deals naturally", Al Olama said 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."

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

"So we have spoken about [small modular nuclear reactors] with the relevant parties," but there were no concrete plans yet in this regard, the minister said.

(Reporting by Federico Maccioni; Editing by Nadine Awadalla and Bernadette Baum)