Musk Asks X Users If Tesla Should Invest $5 Billion in xAI

(Bloomberg) — Elon Musk is asking users of X whether Tesla Inc. should invest $5 billion in his artificial intelligence startup, saying he was “testing the waters” for a potential transaction.

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The Tesla chief executive officer posed the question shortly after the carmaker reported a fourth straight quarter of disappointing profit. Musk was asked during the earnings call if the company would invest in xAI or integrate its chat bot, called Grok, into Tesla’s software.

“Tesla is learning quite a bit from xAI,” Musk said, adding that it had helped advance Full Self-Driving, the suite of driver-assistance features that do not make Tesla’s vehicles autonomous. He said he supported the idea of Tesla investing in xAI, if shareholders approved it, then posted a poll on the matter late Tuesday.

Musk set up xAI in early 2023, months after OpenAI ushered in the AI boom with the launch of ChatGPT. The billionaire co-founded OpenAI as a nonprofit and was its leading funder before resigning from the board in 2018, citing a potential future conflict of interest with his role at Tesla.

Concern about conflicts have resurfaced as Musk has built out his latest startup. In April, he said Tesla was having to make special efforts to retain AI specialists, and that some had left the carmaker for xAI. And in June, Musk confirmed he diverted scarce AI chips from Tesla to X Corp. and xAI.

In the midst of those developments, xAI announced it had raised $6 billion in a funding round that valued the startup at around $18 billion. Sequoia Capital and Andreessen Horowitz were among the firms to take part in one of the biggest investments so far in generative AI.

Musk has asked Tesla investors to sign off on controversial deals before. Shareholders approved the carmaker acquiring SolarCity — the debt-laden solar-panel installer run by two of his cousins — in 2016.

The Tesla CEO expressed regret over the more than $2 billion bailout of SolarCity during a deposition taken over whether he improperly forced fellow directors to accept an overpriced deal. While Musk defeated those claims in 2022, the judge who decided the case faulted the billionaire for failing to properly remove himself from the transaction.

–With assistance from Anne VanderMey.

(Updates with additional background starting in the fourth paragraph.)