Tesla board to consider $5 billion investment in Elon Musk’s AI startup

Elon Musk has revealed that Tesla Inc.’s board will consider a $5 billion investment in his artificial intelligence startup, xAI.

Earlier this week, Musk conducted a poll on X, asking users if they supported the deal, Caliber.Az reports via foreign media.

With more than two-thirds voting, Musk stated on July 24 that “the public is in favour” and the EV maker will deliberate on the matter.

In the initial poll posted Tuesday, Musk emphasized that both Tesla board approval and a shareholder vote would be necessary before any investment could proceed. This question arose shortly after Tesla reported its fourth consecutive quarter of disappointing profits. During the earnings call, Musk was asked whether Tesla would invest in xAI or integrate its chatbot, Grok, into Tesla’s software.

“Tesla is learning quite a bit from xAI,” Musk noted, highlighting that the startup has helped advance Full Self-Driving, a suite of driver-assistance features. He supported Tesla's investment in xAI, contingent on shareholder approval.

Musk established xAI in early 2023, following the AI boom initiated by OpenAI's launch of ChatGPT. Musk co-founded OpenAI as a nonprofit and was its leading funder until he resigned from the board in 2018, citing a potential conflict of interest with his role at Tesla.

Concerns about conflicts of interest have resurfaced as Musk expands his latest startup. In April, he disclosed that Tesla had to make special efforts to retain AI specialists, with some leaving for xAI. Musk confirmed diverting scarce AI chips from Tesla to X Corp. and xAI in June.

Amid these developments, xAI announced it had raised $6 billion in a funding round, valuing the startup at around $18 billion. Sequoia Capital and Andreessen Horowitz were among the firms participating in one of the largest investments in generative AI to date.

Musk has previously asked Tesla investors to approve controversial deals. Shareholders endorsed the carmaker’s acquisition of SolarCity, the debt-laden solar panel installer run by two of Musk’s cousins, in 2016. The Tesla CEO later expressed regret over the more than $2 billion bailout of SolarCity during a deposition regarding claims that he improperly forced directors to accept an overpriced deal. While Musk defeated those claims in 2022, the judge faulted him for failing to properly remove himself from the transaction.