Tesla stock (TSLA) rose Monday morning after CEO Elon Musk said Tesla should be able to invest in his xAI (XAAI.PVT) startup, pending a shareholder vote. This would be another instance of the “Muskonomy” at play, in which Musk’s companies become more financially intertwined and potentially beneficial to him.
In response to a user on X.com asking about Tesla investing in xAI, Musk said that Tesla shareholders would have the chance to “vote on that matter.” The user’s request came after a Wall Street Journal report over the weekend that Musk’s SpaceX (SPAX.PVT) had agreed to invest $2 billion in xAI’s latest fundraising round. The user said it was “not fair” to Tesla retail investors that the company was not invested in xAI, to which Musk agreed and said, “If it was up to me, Tesla would have invested in xAI long ago.”
Musk said in a later post that Tesla should not merge with xAI, although the two companies currently work together. The xAI Grok chatbot was added to Tesla’s vehicles in a recent software update, though this has been a contentious move as Grok has been embroiled in controversy surrounding antisemitic statements.
Bloomberg noted that xAI is also a Tesla customer, purchasing nearly $200 million worth of Tesla megapack energy storage batteries.
Musk’s companies investing in one another — and even merging together — is nothing new. In March, xAI bought out Musk’s X.com in a deal valuing X.com at $33 billion, a very good deal for investors in the social media company. In 2016, Tesla acquired SolarCity for $2.6 billion; the solar firm was struggling at the time and was previously run by Musk’s family members, per Walter Isaacson’s Musk biography.
Indeed, the commingling of resources between Musk’s companies is nothing new, though it is somewhat controversial. Tesla engineers have been working at both X.com and xAI, and highly sought-after Nvidia chips originally destined for Tesla’s AI efforts were directed to xAI.
Shareholder groups have complained about what appears to be a conflict of interest for Musk and his companies in the past. In this case, Musk appears to favor a company like xAI, in which he owns a large stake and can more fully control.
Wall Street analysts, including Wedbush’s Dan Ives, suggested a Tesla and xAI tie-up could enhance Tesla’s artificial intelligence presence and indirectly compensate Musk, whose Tesla pay package has been stuck in legal limbo.
In a recent note, Ives argued that Musk needed a new package giving him 25% voting power to incentivize him, along with “guardrails” that guaranteed his time at the company. Musk chided Ives for the guardrails suggestion, telling the analyst to “shut up.”
Nevertheless, in an interview with Yahoo Finance, Ives brushed off the Musk quip and predicted there was a “more than 50%” chance that Tesla shareholders would approve a compensation package like the one he proposed with the guardrails. But xAI was the real trophy.
“What I view as an XAI merger, to me, that is ultimately sort of the next stage to where we see this all heading,” Ives said, once Musk’s pay package was sorted out.
A new compensation package would create a framework that could eventually lead to a full Tesla and xAI merger, one that Ives said would create “one of the most powerful AI companies” in the world. Recall that Musk said early last year that he would be “uncomfortable” building Tesla into an AI powerhouse without more control.
Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow him on X and on Instagram.
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