Elon Musk, CEO of Tesla, announced on Thursday that he and the Tesla board will deliberate over a potential $5 billion investment in his artificial intelligence startup, xAI. This move has sparked concerns about a possible conflict of interest.
Musk, the world’s richest person, launched xAI last year to rival Microsoft-backed OpenAI. This has led to worries that resources from Tesla might be redirected to support the AI venture.
On Tuesday, Musk conducted a poll on social media platform X, asking if Tesla should invest $5 billion in xAI. The poll garnered overwhelming support, with over two-thirds of nearly 1 million respondents voting in favor. However, it is unclear how many of these voters are Tesla shareholders.
The poll follows Tesla’s announcement that its second-quarter automotive gross margin and profit fell below Wall Street expectations due to price cuts and sales incentives. Musk indicated that xAI’s integration with Tesla could advance full self-driving technology and support the development of a new Tesla data center.
Despite the excitement, some experts raise concerns about the financial implications. Brent Goldfarb, a business school professor at the University of Maryland, argued that investing in xAI might not serve the best interests of Tesla shareholders and suggested that the AI sector could be experiencing a bubble.
Musk’s departure from OpenAI in 2018, due to potential conflicts with Tesla’s AI initiatives, underscores the complexity of balancing interests between his various ventures. xAI recently raised $6 billion in a series B funding round, achieving a post-money valuation of $24 billion. Its investors include Andreessen Horowitz and Sequoia Capital.
Musk has also indicated plans for xAI to be partly owned by investors in X, which he acquired for $44 billion—a value that has since declined. Previous concerns about conflicts of interest include Tesla’s 2016 acquisition of SolarCity, a company founded by Musk and his cousins, which some shareholders viewed as a bailout. However, a Delaware Supreme Court ruling last year found that Musk did not overpay for SolarCity.
