Elon Musk’s artificial intelligence startup xAI is in talks to lease data center capacity in Saudi Arabia, in a move aimed at expanding its infrastructure in regions offering cheap energy and political support.
Introduction: Search for energy and funding
Elon Musk’s artificial intelligence startup, xAI, is in discussions to lease data center capacity in Saudi Arabia, according to people familiar with the matter, as part of an effort to expand its infrastructure in regions that offer cheap energy and political goodwill. These talks highlight the massive costs associated with running advanced artificial intelligence models and companies’ quests to find innovative solutions to reduce those expenses.
AI companies such as xAI, OpenAI, and Meta Platforms are building or leasing massive data centers to train and run the artificial intelligence models that power chatbots, such as xAI’s Grok. These centers are exceptionally expensive to build and operate, and consume massive amounts of energy.
Two potential partners in the Kingdom
The company is in early talks with two potential partners: Humain, a Saudi-backed artificial intelligence company offering xAI several gigawatts of capacity, and another company building a smaller but immediately available 200-megawatt facility, the people said. In either case, xAI would not own the facilities but would lease the capacity instead—renting space within data centers to run its compute-intensive AI models.
Humain’s proposal, while vastly ambitious, remains a long shot. While the AI company is backed by the Saudi Public Investment Fund, the company has yet to build much of the infrastructure it has pledged to construct. Any arrangement with xAI would provide Musk with compute resources years down the line rather than acting as a short-term fix. By contrast, the other prospective partner is already at work on a 200-megawatt facility, making it a more practical near-term option for xAI.
Why Saudi Arabia?
The potential Saudi move fits into a broader trend for Musk, who has been exploring xAI infrastructure where energy is cheap and capital is abundant, one of the people said. This exploration comes amid rising geopolitical and trade tensions in the United States. However, Saudi Arabia’s overflowing sovereign wealth and access to specialized chips make it a deeply appealing option, two people said.
“As power demand goes up, you’re going to need to see some balance between the cost of running these data centers and the cost of powering them,” said Kathryn Huff, who served as a senior official in the Department of Energy’s Office of Nuclear Energy under President Joe Biden. “My mind immediately goes to countries that might be building new nuclear plants as options for that.”
Key internal role at xAI
Internally, xAI founding team member and former Tesla employee Ross Nordeen is leading these infrastructure negotiations, serving as a primary dealmaker and strategist for xAI regarding location and scale, according to people familiar with the company. While former Tesla and X executive Andrej Jacobson helps lead the technical side at xAI, Nordeen is widely seen as a pivotal figure at the company.
Conclusion: Musk’s global strategy
xAI’s talks in Saudi Arabia are further evidence that the future of artificial intelligence will be global. As power demand surges, AI companies will increasingly look to locations worldwide that offer a mix of cheap energy, a favorable political environment, and capital. For Elon Musk, who runs an empire spanning from space to electric vehicles, building a global AI infrastructure is the logical next step in his ambitious plans.
