Elon Musk’s AI company xAI is reportedly in negotiations to secure data centre capacity in Saudi Arabia.

This move is part of xAI’s broader strategy to expand its infrastructure in regions known for offering affordable energy and favourable political conditions, sources told Bloomberg.

The company is currently holding preliminary discussions with two potential partners. One is Humain, an AI firm backed by Saudi Arabia. The proposal is still in the early stages, with much of its promised infrastructure yet to be developed.

The other proposal is from a company with a 200MW facility under construction. This makes the offer a more feasible option for xAI’s immediate needs.

In both scenarios, xAI aims to lease rather than own the data centre capacity to support its compute-intensive AI models.

AI companies, including xAI, OpenAI, and Meta Platforms, are increasingly building or leasing large data centres to support the development and operation of AI models. These facilities require significant investment and consume large amounts of energy.

Internally, Ross Nordeen, a founding member of xAI and a former Tesla employee, is spearheading the negotiations.

This potential Saudi partnership reflects Musk’s broader strategy of locating xAI infrastructure in areas with cheap power and ample capital. Musk has previously established a large data centre in Memphis and hinted at plans for another nearby.

Additionally, xAI is considering data centre opportunities in the UAE and has been in contact with Abu Dhabi-based AI company G42. It is also exploring potential deals in African countries with lower energy and operational costs, sources told the publication.

xAI recently secured $10bn in funding, equally divided between equity and debt.