(Reuters) -Elon Musk's xAI is in discussions to lease data center capacity in Saudi Arabia, Bloomberg News reported on Wednesday, citing people familiar with the matter.

The startup is in discussion with two potential partners: Humain, a Saudi-backed AI company offering xAI several gigawatts of capacity, and another company building a smaller but more immediately available 200-megawatt facility, according to the report.

The Humain proposal remains distant, Bloomberg reported, as the startup launched by Saudi Arabia's sovereign wealth fund is yet to break ground on much of the infrastructure it has pledged to build.

The other company, which Bloomberg did not name, is already working on the 200-megawatt facility, making it a more realistic short-term option for xAI, the report said.

XAI and Humain did not immediately respond to Reuters' requests for comment.

The AI startup has been ramping up its data center capacity to train more advanced models, as it looks to compete more effectively with OpenAI's ChatGPT and Anthropic's Claude. Its supercomputer cluster in Memphis, Tennessee, called Colossus, is touted as the largest in the world.

Big tech companies are expected to spend $320 billion on AI this year, with Meta and CoreWeave ( CRWV ) announcing billions in spending on AI data centers this week.

Saudi Arabia's PIF sovereign wealth fund is expected to play a large role as xAI looks to raise more money from investors in a deal that could value it between $170 billion and $200 billion, the Financial Times reported on Friday. Musk said that the AI startup is not seeking funding right now.