Tesla CEO Elon Musk will ask the company’s board, and then possibly shareholders, to invest up to $5 billion in one of his newest companies, xAI.
Musk recently turned to his social media platform X to gauge public sentiment on a significant investment proposal: whether Tesla should invest $5 billion in his AI startup, xAI. The informal poll garnered substantial attention, with over 958,000 users casting their votes. The results revealed strong support, with 67.9% in favor and 32.1% opposed.
Following the poll results, Musk announced on X, “Looks like the public is in favor. Will discuss with Tesla board.” This statement signals Musk’s intent to present the proposal to Tesla’s board of directors for consideration, and contingent on board approval, a subsequent shareholder vote.
xAI, founded by Musk in March 2023, aims to push the boundaries of artificial intelligence to understand the universe’s true nature. The San Francisco-based company is staffed by a team of professionals who have made significant contributions to the field of AI. One of its most ambitious projects is the construction of a massive supercomputer, dubbed the “Gigafactory of Compute,” expected to be operational by fall 2025.
This supercomputer will power xAI’s chatbot, Grok, designed to offer a unique alternative to existing AI chatbots like OpenAI’s ChatGPT and Google’s Bard.
The investment in xAI has drawn mixed reactions from analysts and the public. Gene Munster, an analyst, commented on X, “This would have a material benefit to xAI, almost doubling its capital raised to date. For Tesla, the impact would be more subtle. Assuming xAI’s valuation reaches $200 billion in the next five years, it would add just over 4% to Tesla’s market cap, which is a significant return on investment.” Munster further recommended that Tesla should consider investing $20 billion to make a more substantial impact.
Despite the positive outlook from some, the proposal has also sparked concerns about potential conflicts of interest. Musk’s decision to start xAI separately from Tesla has led to lawsuits alleging breach of fiduciary duty, with claims that Musk diverted resources meant for Tesla to his AI startup. The plaintiffs argue that Musk’s actions could undermine Tesla’s interests and have demanded that Musk transfer his xAI shares to Tesla.
In a recent earnings call, Musk highlighted the potential synergies between Tesla and xAI, particularly in advancing Tesla’s Full Self-Driving (FSD) capabilities and building a new data center. However, many remain skeptical about the benefits to Tesla shareholders.
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