A Game-Changing Deal in the Desert
Elon Musk is no stranger to audacious moves, but his latest venture might just be his boldest yet. His company, xAI, is reportedly in advanced talks with Saudi Arabia’s Humane AI, a firm backed by the kingdom’s deep-pocketed Public Investment Fund (PIF), to secure multi-gigawatt data centers for artificial intelligence development. If that wasn’t enough, xAI is also eyeing a separate 200-megawatt facility with another unnamed partner to kick things into high gear. This isn’t just about building another data center—it’s about securing the raw power needed to fuel the race for superintelligence, a race Musk believes will shape humanity’s future. But why Saudi Arabia? And what does this mean for the global AI landscape?
The answer lies in two words: energy and capital. Saudi Arabia, with its vast oil wealth and low-cost energy, offers a tantalizing proposition for Musk’s compute-hungry ambitions. The kingdom’s push to diversify its economy through initiatives like Vision 2030 makes it a willing partner, eager to invest in cutting-edge technologies like AI. For Musk, it’s a pragmatic move. Data centers require obscene amounts of electricity, and Saudi Arabia’s abundant, inexpensive energy is a perfect match. Add to that the kingdom’s willingness to throw billions at futuristic projects, and you’ve got a deal that’s hard to resist. But is this partnership a stroke of genius or a risky gamble?
The Bitter Lesson: Compute Is King
To understand why Musk is chasing gigawatts in the desert, you need to grasp what’s driving the AI race. It’s not just about clever algorithms or brilliant coders—it’s about raw computing power. The so-called “bitter lesson” of AI, as discussed in the original conversation, is that more compute power trumps everything else. The more processing muscle you have, the faster you can train AI models, and the closer you get to the holy grail of artificial general intelligence (AGI)—a machine that can think like a human, or better.
Musk knows this better than anyone. His xAI is already building massive data centers, like the Colossus facility in Memphis, Tennessee, with plans for a second nearby. The U.S. dominates the global landscape for large-scale data centers, hosting 80% of facilities with over 100 megawatts of capacity. But even that might not be enough. The demand for compute is insatiable, and Musk is thinking bigger than state-side infrastructure. He’s looking globally, where energy is cheap and capital flows freely. Saudi Arabia fits the bill perfectly.
But there’s a catch. Musk’s history with Saudi Arabia is, shall we say, complicated. Back in 2018, he famously tweeted “funding secured” to take Tesla private, banking on a deal with the Saudi PIF. The deal fell apart, leaving Musk burned and vowing never to work with them again. Yet here we are, with xAI cozying up to the kingdom’s AI ambitions. Perhaps Musk’s relationship with Saudi investor Prince Alwaleed bin Talal, who holds stakes in both X and xAI, has smoothed things over. Or maybe Musk’s pragmatism outweighs past grudges. Either way, it’s a reminder that in the high-stakes world of AI, alliances shift as fast as the technology itself.
Geopolitical Stakes: The U.S. vs. China
This deal isn’t just about Musk and Saudi Arabia—it’s part of a larger geopolitical chess game. The U.S. and China are locked in a battle for AI supremacy, and every data center, chip, and watt of power counts. David Sacks, a prominent tech investor and self-styled “AI Czar,” put it bluntly: in five years, if Nvidia holds 80% of the global AI chip market, the U.S. wins. If Huawei dominates, China takes the crown. It’s a zero-sum game, and Musk’s Saudi deal could tip the scales.
Sacks argues that restricting American tech exports—like Nvidia’s cutting-edge GPUs—pushes allies like Saudi Arabia toward Chinese alternatives. Huawei, with its high-quality chips and tight ties to the Chinese state, is a formidable competitor. The company’s founder, Ren Zhengfei, operates in lockstep with Beijing, making Huawei a de facto arm of Chinese industrial policy. If the U.S. wants to maintain its edge, it needs to ensure American technology sets the global standard. Musk’s deal with Saudi Arabia could keep the kingdom in the U.S. orbit, but it’s a delicate balancing act. National security concerns loom large, and the U.S. government will be watching closely.
Then there’s the question of manufacturing. The U.S. relies heavily on Taiwan’s TSMC for the chips that power AI, from Nvidia’s GPUs to Apple’s iPhones. But as tensions rise in the Taiwan Strait, that dependence looks increasingly risky. Sacks and others argue that the U.S. must bring chip manufacturing home, from start to finish. It’s not just about building factories—it’s about replicating the entire supply chain, from raw materials to finished chips. China has already mastered this with consumer electronics, outpacing the U.S. in both quality and cost. If America doesn’t catch up, it risks ceding not just AI but the entire tech industry to its rivals.
Musk’s Long Game: Private Power and Human Survival
Musk isn’t just building data centers—he’s playing a long game for humanity’s future. In a recent post on X, he argued that AI must focus on “long-term optimization” rather than short-term gains like grabbing user attention (think TikTok’s dopamine hits). Public companies, beholden to shareholders and quarterly earnings, often prioritize quick wins over big-picture goals. That’s why Musk believes xAI must stay private, free from the pressures of stock market cycles. It’s a bold stance, but it makes sense. If you’re trying to build AI that can extend humanity to the stars, you don’t want Wall Street breathing down your neck.
This philosophy also explains why Musk is keeping xAI separate from Tesla. While Tesla’s real-world data—from its cars and robots—could supercharge xAI’s models, a merger might dilute both companies’ focus. Tesla’s strength lies in its ability to gather vast amounts of real-world vision data, a resource that’s becoming the new gold in AI. Meanwhile, xAI can provide the intelligence to power Tesla’s autonomous vehicles and humanoid robots. A strategic partnership, perhaps with a limited stock swap, could align their interests without compromising their independence. It’s a win-win, but only if they can navigate the complexities of data sharing and corporate control.
The Energy Conundrum
At the heart of Musk’s Saudi deal is energy—or the lack thereof. AI data centers are power hogs, and the U.S. is struggling to keep up. Bureaucracy, outdated grids, and regulatory hurdles have slowed the buildout of new energy infrastructure. Saudi Arabia, with its streamlined decision-making and cheap energy, offers a workaround. But it’s a stark reminder of America’s Achilles’ heel. If the U.S. can’t solve its energy problem, it risks falling behind in the AI race, no matter how many chips Nvidia produces.
The Trump administration’s proposed $70 billion investment in AI and energy could help, with plans for new data centers, grid upgrades, and training programs. But the devil’s in the details. Will it prioritize fossil fuels, as Chevron’s involvement suggests, or embrace renewables like solar? Musk, a longtime advocate for solar through Tesla’s energy division, believes it’s the future. Yet he’s also pragmatic, exploring all avenues to secure the power xAI needs. The question is whether the U.S. can match his ambition without relying on government handouts, which some argue distort the market.
Reflections: A Faustian Bargain?
There’s something exhilarating about Musk’s relentless pursuit of AI supremacy, but it’s not without risks. Partnering with Saudi Arabia raises ethical questions. The kingdom’s human rights record is spotty, and its authoritarian government isn’t exactly aligned with Musk’s stated mission to advance human freedom. Then there’s the specter of dependency—relying on foreign energy and capital could leave xAI vulnerable to geopolitical shifts. What happens if the Saudi deal sours, as it did with Tesla? Or if China’s influence grows in the region?
On the flip side, Musk’s pragmatism is hard to argue with. The AI race waits for no one, and those who hesitate risk being left behind. By securing compute power now, xAI can stay at the frontier, pushing the boundaries of what’s possible. It’s a high-stakes bet, but Musk has never been one to play it safe. As he once said, “If you’re not failing, you’re not innovating enough.” Whether this deal will be a triumph or a cautionary tale remains to be seen, but one thing’s clear: Musk is all in.
Conclusion: The Future Is Compute
Elon Musk’s Saudi deal is more than a business transaction—it’s a declaration of intent. In the race for superintelligence, compute is king, and Musk is pulling out all the stops to secure it. From Saudi Arabia’s deserts to Tennessee’s data centers, he’s building an empire of processing power, one gigawatt at a time. But the stakes are higher than just xAI’s success. This is about America’s place in the world, the balance of power with China, and humanity’s shot at a multi-planetary future. Love him or hate him, Musk is forcing us to think big. The question is, can the rest of us keep up?
