Elon Musk Proposes $5 Billion Tesla Investment in His AI Startup xAI

Tesla CEO Elon Musk has initiated an informal poll on X (formerly Twitter), asking whether the electric vehicle giant should invest $5 billion in his artificial intelligence startup, xAI, a move that has raised eyebrows in the tech and automotive industries.

CNBC reports that following Tesla’s second-quarter earnings call, CEO Elon Musk took to social media platform X to gauge public opinion on a potential multi-billion dollar investment by Tesla into xAI, his latest venture in the artificial intelligence sector. The poll, which Musk described as “just to test the waters,” asked whether Tesla should invest $5 billion into xAI, contingent on valuation set by credible outside investors and subject to board approval and shareholder vote.

This proposition comes at a critical time for Tesla, as the company reported its fourth consecutive quarter of earnings falling short of analysts’ expectations. The electric vehicle manufacturer experienced declining revenue in its core automotive segment, although it saw a significant boost in energy storage sales. Despite these challenges, Tesla’s earnings call focused on future prospects, including the development of robotaxis and humanoid robots.

The potential investment in xAI raises questions about the relationship between Musk’s various companies. While there is a history of inter-company transactions, such as SpaceX purchasing ad campaigns on X to promote its Starlink services, the scale of the proposed xAI investment is unprecedented. During the earnings call, Musk addressed shareholder inquiries about Tesla’s potential involvement with xAI, stating that Tesla has been “learning quite a bit from xAI” and that it has been “helpful in advancing Full Self-Driving and in building up the new Tesla data center.”

Musk’s xAI, founded in March 2023, aims to develop large language models and AI software products to compete with offerings from tech giants like Google, Microsoft, OpenAI, and Meta. The company’s first product, Grok, is positioned as a more irreverent alternative to existing AI chatbots, although it currently lacks the advanced capabilities of its competitors.

The proposed investment has sparked discussions about the potential benefits and risks for Tesla shareholders. While Musk expressed support for such an investment, he emphasized the need for shareholder approval. The $5 billion figure mentioned in the social media poll was not discussed during the earnings call, leaving many to question the rationale behind this specific amount.

This development occurs against the backdrop of xAI’s recent funding success, with the company reportedly raising a $6 billion series B round and achieving a post-money valuation of $24 billion in May. However, questions remain about why Musk did not initially choose to develop xAI within Tesla, given the potential synergies between AI technology and autonomous driving capabilities.