An apparent conflict of interest arose when Tesla CEO Elon Musk indicated on Thursday that he and the board of directors will consider investing $5 billion in his artificial intelligence business xAI.
The wealthiest man in the world, Elon Musk, established xAI last year to take on OpenAI, which is sponsored by Microsoft. His actions have raised fears that he may transfer funds from the carmaker to the AI firm.
The plan has the backing of several Musk supporters: Tuesday, Musk asked X users if they thought Tesla should put $5 billion into xAI in a poll he sponsored. Almost one million people cast ballots in favor, making it over 63%. How many of them are Tesla investors remains a mystery. Despite slashing pricing and offering incentives to encourage sales, Tesla’s announcement on Tuesday that its automotive gross margin and profit fell short of Wall Street projections coincided with the poll.
It seems like most people are on board with it. To discuss with the Tesla board, Musk stated in a Thursday post on X.
Musk stated on Tuesday during Tesla’s earnings conference call that xAI will be “helpful in advancing full self-driving and in building up the new Tesla data center,” and he also mentioned that there are chances to link xAI’s chatbot, Grok, with Tesla’s software.
Most AI companies are still figuring out their business models while pouring a lot of money into technology, even though there has been a stampede of investments.
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University of Maryland management professor Brent Goldfarb remarked, “It’s hard to claim that this is in the best interest of their Tesla shareholder,” implying that it was tantamount to a wealth transfer for Tesla.
Who will pay for it and where will the money be made in artificial intelligence? No one knows for sure. To him, it seemed like AI was in the midst of a bubble right now.
Musk co-founded OpenAI in 2017 but departed in 2018 because of concerns about a possible future disagreement with Tesla, another company working on artificial intelligence software for autonomous vehicles.
To hold on to talent in the face of competition from Open AI, Musk said in April that xAI is bringing on board a few engineers from Tesla. Post-money valuation for Musk’s xAI was $24 billion, thanks to $6 billion in series B fundraising in May. Sequoia Capital and Andreessen Horowitz are among its backers. In the past, Musk has stated his intention for X investors—the company he acquired for $44 billion—to own 25% of xAI. Since then, the value of the social media corporation has plummeted. Musk has taken heat in the past for what some see as possible bias stemming from the many businesses he controls.
Some Tesla stockholders claimed that Musk and his cousins’ 2016 $2.6 billion purchase of SolarCity, a faltering rooftop solar firm, was a rescue. The Delaware Supreme Court upheld the claim that Musk did not pressure Tesla to overpay for SolarCity last year.
FAQs
Elon Musk founded xAI, an artificial intelligence company aiming to understand the true nature of the universe.
Musk is seeking a substantial investment of $5 billion from Tesla’s board to accelerate xAI’s development. This infusion of capital would likely be used for research, development, and talent acquisition.
