Elon Musk seeks Tesla board’s nod for $5 billion xAI expansion funds

Elon Musk, the chief executive of Tesla, announced his intention to seek board approval for a significant $5 billion investment in his artificial intelligence startup, xAI. This move could further integrate Musk’s extensive network of technology companies.

Public Poll and Board Approval

On Tuesday, Musk engaged his followers on his social media platform, X, by posting a poll that asked, “Should Tesla invest $5b into @xAI, assuming the valuation is set by several credible outside investors? (Board approval & shareholder vote are needed, so this is just to test the waters).”

The poll garnered 958,086 votes, with 68 per cent in favour.

Also Read: From Grok-1 to Grok-1.5V: Elon Musk xAI’s rapid progress fuels investor confidence, secures $6 billion fund

Musk responded on Thursday, stating, “Looks like the public is in favour. Will discuss with Tesla board.”

Tesla’s Vision and Challenges

Tesla, which recently missed its second-quarter earnings estimates, resulting in a more than 10 per cent stock drop, is striving to transform itself from an electric vehicle manufacturer to a leader in robotics and AI.

Musk has committed to developing autonomous “robotaxis” and humanoid robots driven by advanced technology. He noted on a recent earnings call that “Tesla is learning quite a bit from xAI” regarding the training of its fully self-driving technology and the construction of a new data centre in Austin, Texas, according to the Financial Times.

Potential Conflicts of Interest

The proposed investment in xAI raises concerns about potential conflicts of interest within Musk’s web of companies, which includes SpaceX and Neuralink.

Also Read: Elon Musk’s start-up xAI seeks to raise $1bn

Earlier this year, Musk admitted to reallocating thousands of scarce Nvidia chips from Tesla to X and xAI. Despite allegations of impropriety, Musk defended the move, explaining that Tesla had not yet built the necessary infrastructure to utilise the chips. The movement of senior staff and engineers between his companies has also drawn scrutiny.

Board Independence and Legal Challenges

The independence of Tesla’s board has been questioned, especially after a Delaware court voided a record $56 billion pay package awarded to Musk, describing the directors as “supine servants of an overweening master.”

Despite this, Musk won a shareholder vote re-ratifying his stock award last month and is appealing the court’s decision.

xAI’s Ambitions and Market Competition

Founded in July last year, xAI is developing a chatbot called Grok and raised $6 billion at an $18 billion valuation in May.

Musk aims to compete with leading AI firms like OpenAI and Anthropic. In a recent interview, Musk acknowledged that his top AI model is significantly weaker than OpenAI’s. OpenAI, backed by Microsoft with a $13 billion commitment, has set a high bar in the AI race.

Future Prospects

xAI is aggressively pursuing capital and is building a “gigafactory of compute” in Memphis, which will house 100,000 Nvidia GPUs for training and running large language models powering generative-AI chatbots. A $5 billion investment from Tesla would significantly bolster xAI’s capabilities, bringing it closer to rivalling the resources of its competitors.

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