Tesla agreed on Wednesday to invest $2 billion into xAI, which Elon Musk launched nearly three years ago to rival OpenAI.
Shareholders of the EV company reportedly didn’t agree with Tesla’s investment into xAI and voted against it last year, but now the decision has gone ahead. During a conference call to analysts, company chief executive Elon Musk said Tesla would be stopping production of two EVs as part of a shift towards robotics after the company reported its first ever decline in annual revenue.
Investment from Tesla will more than double this year to $20 billion, the company said, with $2 billion going to xAI.
In Tesla’s shareholder deck on Wednesday, the company said it had “entered into a framework agreement in connection with the investment,” to evaluate “potential AI collaborations between the companies.”
This is a circular deal in many ways. According to Bloomberg at the time, shareholders voted against authorising the xAI investment in November, with abstentions counting as votes. Tesla proceeded anyway, suggesting that the agreement builds upon the existing relationships of both companies and that they will be working closer together.
“As set forth in Master Plan Part IV, Tesla is building products and services that bring AI into the physical world. Meanwhile, xAI is developing leading digital AI products and services, such as its large language model (Grok),” the shareholder letter reads, as shared by TechCrunch. “In that context, and as part of Tesla’s broader strategy under Master Plan Part IV, Tesla and xAI also entered into a framework agreement in connection with the investment.”
Musk reportedly said: “If there are things xAI can help accelerate our progress, then why should we not do that? And that is the reason why we’ve gone ahead with such an investment. Because this is part of the strategic initiative.”
The news comes shortly after xAI revealed it had raised $200 billion in a Series E funding round. Now it’s been revealed that Tesla was among the investors. xAI is best-known for developing Grok, its AI chatbot and image generator, which attracted controversy at the start of the year for generating nonconsensual deepfake images of women and underage girls.
Tesla includes Grok as a feature in some of its EV infotainment systems and already supplies its Megapack batteries to power xAI data centres.
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