Elon Musk will ‘discuss’ Tesla investing $5 billion in his private AI company

Elon Musk says that he will ‘discuss’ Tesla investing $5 billion in xAI, his own private artificial intelligence company.

For the last few years, Musk has claimed that “Tesla is an AI company.”

Despite that claim and having a fiduciary duty to Tesla shareholders as the chief executive of the company, Musk decided to start his own private AI startup.

The CEO’s reasoning was that it was more difficult to recruit some AI researchers at Tesla than at an AI startup. Ironically, the official reason he gave for leaving OpenAI, another AI startup, was because it was starting to compete with Tesla on talent.

Musk and Tesla’s board are currently being sued for breach of fiduciary duty over the xAI issue. The lawsuit cites the talent acquisition issue, Musk’s threat not to build AI products at Tesla if he doesn’t get 25% control over the company, and, more recently, the fact that Musk diverted H100s processors meant for Tesla to xAI.

The shareholders suing Musk and Tesla’s board of directors are asking for Musk to transfer his shares of xAI to Tesla along with other damages.

Despite this mess of a governance situation, Musk is now planning to discuss tell the board to bring a $5 billion investment into xAI to a shareholder vote.

As usual, he claims that he is doing it because a poll on X has approved it:

Musk has manipulated the public using Twitter polls before. In 2021, the CEO claimed that he would sell 10% of his Tesla stocks if a Twitter poll approved it amid growing concerns about taxing the rich.

The CEO claimed that selling his stocks would force him to pay taxes. In fact, Musk was due to sell a lot of stocks to cover his stock options that were due to be exercised. He was facing a stock sale and large tax burden regardless of the poll’s result.

Electrek’s Take

I ran my own highly scientific poll on Twitter, and I got the inverse results:

Elon’s claim that he will “discuss” an investment in xAI with Tesla’s board is ridiculous. We already know that the board is fully under his control, as a judge ruled. He will tell the board to bring this to a shareholder vote.

However, I wouldn’t be shocked if he ends up facing some pushback at the board level this time since they are also being sued for not doing anything about his breach of fiduciary duty.

Considering the entire xAI situation is the core of the lawsuit, they may think twice about backing the idea simply for optics amid the lawsuit.

This lawsuit is strong, in my opinion, and gets stronger every time Elon opens his mouth. Just at Tesla’s earnings call this week, Elon complained about the cost and availability of NVIDIA’s H100 processors right after he sent a large shipment of them meant for Tesla to xAI.

That, combined with the fact that Elon himself claimed that a conflict of interest regarding talent recruiting pushed him to leave OpenAI, the fact that Twitter and xAI hired from Tesla, his open threat about AI products at Tesla, and more, it looks like an easy case for the shareholders.

Yet, most of those shareholders are still happy backing him. The reasonable ones are selling Tesla’s stock – making sure that only the Elon cultists remain and Elon can do whatever he wants.