Musk to Discuss $5B xAI Investment With Tesla Board

Tesla CEO Elon Musk said Thursday that he and the board will examine investing $5 billion in his artificial intelligence venture xAI, raising concerns about a conflict of interest

To contend with OpenAI, which is sponsored by Microsoft, Musk, the world’s wealthiest individual, established xAI last year. That prompted apprehensions that he may allocate a portion of the automaker’s resources to the AI company.

Many Musk supporters have expressed their endorsement of the concept: Musk initiated a poll on Tuesday, inquiring whether Tesla should allocate $5 billion to xAI on the social media platform X.

The majority of the nearly one million respondents, more than two-thirds, voted in favor. The number of Tesla investors needs to be clarified.

The poll was conducted on Tuesday after Tesla announced its second-quarter automotive gross margin and profit were below Wall Street expectations. The company responded by offering incentives and reducing prices to increase sales.

“It appears that the public is in favor,” Musk stated in a post on X on Thursday that he would consult with the Tesla board.

Musk stated during Tesla’s earnings conference call on Tuesday that xAI would be “beneficial in the advancement of full self-driving and the construction of the new Tesla data center.” He also mentioned the opportunities to integrate xAI’s chatbot, Grok, with Tesla’s software.

While investing significantly in technology, the majority of AI firms are still in the process of developing business models despite the recent investment frenzy.

Brent Goldfarb, a business school professor at the University of Maryland, stated that it is difficult to assert that this is in the best interest of Tesla shareholders. He also noted that it equated to a transfer of Tesla wealth.

“In general, there is a lack of certainty regarding the source of revenue and the individuals responsible for funding AI.” “AI is currently exhibiting all the characteristics of a bubble,” he stated.

Musk departed OpenAI, which he co-founded, in 2018 due to a potential future conflict with Tesla, which is involved in developing AI software for self-driving vehicles.

Musk stated in April that xAI is employing a few engineers from Tesla to retain talent in the face of Open AI’s recruitment efforts. This information was accessed through a new tab.

In May, Musk’s xAI secured $6 billion in series B funding, resulting in a post-money valuation of $24 billion. Sequoia Capital and Andreessen Horowitz are among its investors.

Musk has previously stated that he intends for investors in X to own a quarter of xAI, which he acquired for $44 billion. Since that time, the value of the social media company has plummeted.

Musk has been criticized for the potential conflicts of interest arising from the numerous companies he owns and operates.

The 2016 acquisition of SolarCity, a struggling rooftop solar company founded by Musk and his cousins, for $2.6 billion was alleged by certain Tesla shareholders to be a bailout.

Nevertheless, the Delaware Supreme Court upheld last year’s ruling that Musk did not pressure the electric carmaker to overpay for SolarCity.