Elon Musk's artificial intelligence venture xAI is reportedly in preliminary discussions with investors for a new funding round that would place the company's valuation in the $170-$200 billion range.

The Saudi Arabian sovereign wealth fund, the Public Investment Fund, is expected to pick a significant stake in the round, according to a Financial Times report.

PIF already maintains exposure to xAI through its investment in Kingdom Holdings Company, which deployed $800 million into the AI firm.

However, Musk dismissed the reports on his X platform, stating that xAI "is not seeking funding right now" and has "plenty of capital."

The potential raise would mark another milestone for the AI startup, which has rapidly scaled its operations since launching in July 2023. 

Morgan Stanley said that xAI raised a $5 billion debt facility and separate $5 billion strategic equity investment in June, as the company expands its computational infrastructure.

xAI's valuation has surged from $80 billion following its acquisition of X. The transaction valued X at $33 billion.

The AI company positions itself as an alternative to OpenAI's ChatGPT service. OpenAI is also planning to raise up to $40 billion at a $300 billion valuation.

The potential funding round reflects the substantial capital demands facing AI companies as they compete to develop and deploy advanced language models and supporting infrastructure.