xAI explores Gulf data center partnerships for cheaper AI infrastructure

Elon Musk’s xAI is in talks with data center companies in Saudi Arabia and the UAE to lease computing capacity, as the billionaire seeks to expand his AI startup in regions with cheaper energy and more favorable regulations. The move reflects the growing global competition for AI infrastructure, with Gulf nations positioning themselves as key players in the artificial intelligence race through strategic investments and partnerships.

What you should know: xAI is exploring multiple partnerships across the Gulf region to support its AI operations and Grok chatbot development.

• In Saudi Arabia, xAI is considering two potential partners: Public Investment Fund-backed Humain, which has ambitious plans but is less developed, and an unnamed smaller company already building a 200-megawatt facility.
• The company has also been in contact with Abu Dhabi AI conglomerate G42 and is considering data center deals in Africa.
• Saudi Arabia appears to have the advantage due to its investment appetite and access to advanced chips.

Why this matters: The Gulf region’s push into AI infrastructure represents a strategic shift in global computing power distribution, with significant implications for both regional economies and international AI development.

• Capturing customers for digital infrastructure is crucial for both Saudi Arabia and the UAE, with employment opportunities and revenue from energy consumption at stake.
• The partnerships would give xAI access to cheaper energy costs and potentially more accommodating regulatory environments compared to traditional tech hubs.

The big picture: xAI’s expansion into Gulf data centers reflects broader trends in the AI industry, where companies are increasingly seeking cost-effective infrastructure solutions to support their growing computational needs.

• The move comes as xAI’s Grok chatbot competes directly with established players like ChatGPT, requiring substantial computing resources to remain competitive.
• Gulf nations are leveraging their energy advantages and sovereign wealth funds to position themselves as essential partners in the global AI ecosystem.