Business
Tesla plans billion-dollar investment in Musk's AI start-up xAI
Move raises questions about conflicts of interest: Electric car manufacturer aims to reposition itself as a robotics and AI company.
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Elon Musk, CEO of Tesla, has announced that he intends to seek approval from the board to invest $5 billion in his AI start-up xAI. This move could once again raise questions about conflicts of interest, as Tesla increasingly positions itself as a company for robotics and artificial intelligence.
Musk published a poll on his social network X on Tuesday, asking: "Should Tesla invest $5 billion in @xAI, provided the valuation is determined by multiple credible outside investors? (Board and shareholder decisions are required, this is just a sentiment test)." On Thursday, with 68 percent of the 958,086 votes in favor of the proposal, he responded: "Looks like the public is in favor. Will discuss it with the Tesla board.
The electric car manufacturer, whose profit fell short of expectations in the second quarter and subsequently dropped by more than 10 percent on Tuesday, is attempting to transform from a pure electric vehicle manufacturer into a robotics and artificial intelligence company. Musk has promised to build a fleet of autonomous "robotaxis" and humanoid robots powered by this technology.
In the latest earnings report, Musk said that "Tesla is learning a lot from xAI" regarding the training of its Full-Self-Driving technology and the construction of a new Tesla data center in Austin, Texas.
The planned investment, however, could once again raise questions about conflicts of interest within Musk's network of companies, which includes SpaceX and Neuralink. The CEO has admitted to redirecting thousands of Nvidia chips from Tesla to X and xAI, and many executives and engineers have moved between the companies. Musk denied any wrongdoing, stating that the chips were redistributed because Tesla had not yet built the infrastructure for the graphics processors.
The independence of the Tesla board was also called into question. A court in Delaware had annulled a record compensation package of 56 billion US dollars for Musk earlier this year and described the directors as "submissive servants of an overbearing master." Nonetheless, last month Musk won a shareholder vote to reinstate his historic stock package and is contesting the court's decision.
xAI, officially founded in July of last year and currently working on a chatbot named Grok, raised $6 billion in May at a valuation of $18 billion. Musk aims to catch up with competitors such as OpenAI and Anthropic, who have taken an early lead in the race to develop intelligent chatbots. OpenAI, supported by Microsoft, has raised $13 billion to date.
Musk is investing heavily to catch up with this lag. His start-up xAI is building a "gigafactory for computing power" in Memphis, equipped with 100,000 of the latest Nvidia GPUs, which will be used for training and running large language models for generative AI chatbots. A $5 billion investment from Tesla would provide xAI with similar financial firepower to its larger rival within just 12 months.