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vantagefeed.com > Blog > Business > Elon Musk seeks Tesla board approval for $5 billion investment in xAI startup
Elon Musk seeks Tesla board approval for  billion investment in xAI startup
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Elon Musk seeks Tesla board approval for $5 billion investment in xAI startup

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Last updated: July 25, 2024 7:13 pm
Vantage Feed Published July 25, 2024
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Tesla CEO Elon Musk said he will seek board approval to invest $5 billion in artificial intelligence startup xAI, potentially further strengthening his network of tech companies.

On Tuesday, Musk posted a poll on his social media network, X, asking: “Should Tesla invest $5 billion in @xAI, assuming valuation is set by multiple credible outside investors? (This is a wait-and-see move, as it requires board approval and a shareholder vote).”

On Thursday, after 68 percent of 958,086 votes were cast in favor of the proposal, he responded, “It appears the public is in favor. I will discuss this with Tesla’s board of directors.”

The automaker, whose shares plunged more than 10 percent on Tuesday after it missed second-quarter profit expectations, is trying to reinvent itself from an electric-car maker into a robotics and AI company.

Musk has promised to build a fleet of autonomous “robo-taxis” and humanoid robots powered by the technology.

“Tesla is learning a lot from xAI” regarding training its self-driving car technology and building a new Tesla data center in Austin, Texas, he said on an earnings call this week.

But if the investment goes ahead, it could rekindle questions about conflicts of interest among Musk’s network of companies, which also includes SpaceX, which operates the spacecraft, and Neuralink, which is developing computer-brain interfaces.

Musk acknowledged earlier this year that he had diverted thousands of scarce Nvidia chips from Tesla to X and xAI, and many senior staff and engineers have been moved between the two businesses. Musk has denied any wrongdoing and said the chips were reallocated because the automaker had not yet built the infrastructure to house the graphics processing units.

The independence of Tesla’s board of directors has also come into question: Earlier this year, a Delaware court called the directors “obedient servants of overbearing masters” and criticized Chairman Robin Denholm for “taking a lax stance in her oversight duties,” voiding a record $56 billion compensation package for Musk.

But Musk won a shareholder vote last month to reauthorize his historic stock compensation and is challenging the court decision.

xAI, which officially launched in July last year and is developing a chatbot called Grok, raised $6 billion in May at a valuation of $18 billion.

Musk is trying to catch up with rivals OpenAI and Antropic, who have been ahead in the race to develop intelligent chatbots. In an interview this week, Tesla’s chief executive acknowledged that his company’s top AI model is “orders of magnitude” worse than OpenAI’s.

OpenAI, which is developing Chat GPT, has raised more funding than its rivals to date, with Microsoft alone raising $13 billion, according to people familiar with the matter. Musk, who helped launch OpenAI in 2015 but stepped down from the board in 2018 after differences with co-founder Sam Altman, is investing heavily to close the gap.

His cash-hungry startup is building what it calls a “gigafactory of computing” in Memphis, housing 100,000 of the latest Nvidia GPUs that will be used to train and run the massive language models that power its generative AI chatbots.

The $5 billion investment from Tesla puts xAI close to matching the might of its larger rivals just 12 months after founding.

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