Elon Musk's xAI is negotiating the leasing of a data center in Saudi Arabia, seeking to expand with cheap energy

Musk's xAI is expanding its infrastructure focus to the Middle East, aiming to leverage the region's cheap energy, abundant capital, and political goodwill to power its compute-intensive AI models.

On July 16, media reports indicated that xAI is in preliminary talks with potential partners in Saudi Arabia to lease data center capacity. Partners at the negotiation table include the AI company Humain, supported by the Saudi Public Investment Fund (PIF), and another anonymous company that is building a 200-megawatt facility.

Reportedly, xAI's negotiations in Saudi Arabia involve two distinctly different proposals. One is a grand plan proposed by Humain, which promises to provide xAI with several gigawatts of massive computing capacity. However, this proposal is more like a long-term commitment. Despite Humain's backing from the Saudi PIF, most of the infrastructure it promises to build has yet to break ground, and any agreement with xAI would not provide computing resources for several years.

In contrast, the proposal from another potential partner is more realistic and urgent. This company is already constructing a 200-megawatt data center facility, which can provide xAI with a more feasible short-term solution.

In both cases, xAI will adopt a leasing model, renting space in data centers to run its compute-intensive AI models rather than directly owning these facilities. This move helps xAI maintain asset flexibility during its early development stages.

The Energy and Capital Logic Behind the AI Race

Like competitors such as OpenAI and Meta, xAI needs to build or lease large-scale data centers to train and run AI large models like Grok. These facilities not only have high construction and operational costs but also consume enormous amounts of electricity.

According to data from Carbon Collective, a 1-gigawatt facility consumes energy equivalent to nearly 900,000 households' electricity usage per year. Former senior official of the U.S. Department of Energy's Nuclear Energy Office, Kathryn Huff, commented:

This makes complete sense. As electricity demand surges, you need to seek a balance between the operational costs of data centers and electricity costs.

She believes that countries capable of building new nuclear power plants are ideal choices for hosting these facilities. Saudi Arabia's abundant national wealth and ability to acquire dedicated chips make it xAI's most attractive option currently.

However, at the same time, xAI is also advancing its layout in the United States, with a large data center in Memphis housing a supercomputer named "Colossus," and Musk has publicly previewed plans to build a second facility nearby.

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