Tesla Shareholders Urge Board to Invest $5 Billion in Elon Musk’s AI Startup

A growing group of Tesla shareholders is advocating for a significant strategic move: a $5 billion investment in xAI, the artificial intelligence startup founded by Tesla (TSLA) CEO Elon Musk. With nearly 1,400 shareholders backing the proposal, the initiative is gaining momentum as investors see potential synergies between the electric vehicle giant and Musk’s ambitious AI venture.

The Shareholders’ Request

The proposal, which is expected to be formally submitted to Tesla’s board of directors, has garnered the support of 1,383 shareholders who collectively own over 4 million shares in the company. Spearheaded by investor Alexandra Merz, the group believes that this investment could position Tesla at the forefront of the rapidly evolving AI landscape while continuing to focus on its core business areas such as electric vehicles, energy solutions, and autonomous driving technology.

According to the letter to Tesla’s board, the shareholders argue that an investment in xAI could accelerate Tesla’s AI initiatives, including its Full Self-Driving (FSD) technology and Optimus robots. These projects are central to Tesla’s long-term growth strategy, with the potential to revolutionize the transportation and robotics industries. Moreover, Tesla’s AI-driven Dojo supercomputer, designed to train the company’s autonomous systems, could benefit from the advancements being made at xAI.

Musk’s Vision for AI Integration

The push from shareholders follows a poll Musk posted on his social media platform, X, asking his followers if Tesla should invest $5 billion in xAI, provided the valuation is confirmed by credible external investors. The poll, which received over 958,000 responses, showed a majority in favor of the investment. While many respondents may not have a direct stake in Tesla, the overwhelming support led Musk to indicate that he would bring the proposal to Tesla’s board for discussion.

xAI, which recently secured $6 billion in a Series B funding round, has already made significant strides in the AI space. Backed by high-profile investors like Andreessen Horowitz, Sequoia Capital, and Saudi Arabian investor Prince Alwaleed bin Talal, xAI has developed Grok, a chatbot designed to compete with OpenAI’s ChatGPT. The company’s rapid growth has pushed its valuation to $24 billion, further fueling interest from Tesla shareholders.

Strategic Implications for Tesla

Tesla investors see this potential investment as a way to leverage xAI’s cutting-edge technology to enhance Tesla’s existing AI projects. The integration of xAI’s developments could provide Tesla with a competitive edge in the autonomous vehicle market, particularly as it prepares for a demonstration of its robotaxi technology later this year.

However, Musk’s dual leadership of Tesla and xAI has raised concerns among some stakeholders. Critics, including prominent politicians like Massachusetts Senator Elizabeth Warren, have questioned whether Musk’s management of multiple companies could lead to conflicts of interest. Warren has publicly called on Tesla’s board to ensure that Musk is meeting his fiduciary responsibilities to Tesla shareholders, rather than prioritizing his personal ventures.

The Road Ahead

Despite the potential benefits of a strategic partnership between Tesla and xAI, the proposal has sparked debate within the investment community. Some shareholders have expressed concerns that shifting resources from Tesla to xAI could dilute the company’s focus on its core business. Moreover, legal challenges have arisen, with lawsuits filed by shareholders who allege that Musk’s involvement with xAI may be diverting critical resources away from Tesla.

As Tesla’s board considers the shareholders’ request, the decision will likely hinge on a delicate balance between fostering innovation and ensuring that Tesla remains focused on its primary objectives. With AI poised to play a crucial role in Tesla’s future, the outcome of this proposal could shape the company’s trajectory in the years to come.

In summary, the call for Tesla to invest $5 billion in xAI represents a bold move by shareholders eager to see the company take a leading role in the AI revolution. While the potential rewards are significant, the risks involved highlight the importance of careful consideration by Tesla’s board as it weighs the long-term implications of such an investment.