BMW are playing with ideas all the time. So do the M GmbH.
But Business case phase is the crucial point.

The E53 M prototype has also been produced: general public has seen it modified as X5 LeMans Concept. But as you know it never get into production.

The same case was with e.g. E39 5er Touring & M8 Coupe - just to name two.

I doubt the BMW Board of Management will give X5 M a green light. To make a X5 worthy of M badge it would be required to use very strong & expensive lightweight construction materials which would provide extreme torsional stiffness & much lower centre of gravity. Development would be too costly and the car would cost too much, or at lower price the profit margin would be thin.

Instead of M a much more powerful "Si" or even "Sii" variant is much more possible - with an uptuned V8 turbo engine (450+hp).

But maybe the lightweight technology will be more affordable in the coming years, so ... who knows. Maybe the X5 M will pass the business case & the prototype will be worthy to wear the M badge. Btw, M engineers are having a lot of problems with E61 M5 Touring rear suspension - they had to develop a brand new lightweight solution, and the project is now become very costly. Now imagine the problems with X5.

We shall see what the future will bring ...