Elon Musk, the CEO of Tesla, recently posted an informal poll on social media platform X, asking whether his company should invest $5 billion into his newest startup, xAI. This poll was shared shortly after Tesla reported its second-quarter earnings, which fell short of analysts’ expectations for the fourth consecutive quarter. While Tesla’s core automotive segment saw declining revenue, the company experienced soaring energy storage sales and highlighted the potential of its robotaxis and humanoid robots currently in development.
Elon Musk is known for running multiple companies simultaneously, including Tesla, SpaceX, The Boring Company, Neuralink, X Corp., and now xAI. These companies often collaborate and share resources, as seen in examples such as SpaceX running ad campaigns on X and The Boring Company working on tunnels at Tesla’s Texas factory. During the recent earnings call, Musk discussed the potential for Tesla to integrate xAI’s software, named Grok, into its vehicles to advance its Full Self-Driving technology.
The $5 billion investment proposal for xAI sparked interest and speculation among shareholders and investors. Musk indicated that shareholder approval would be necessary for such a significant investment from Tesla. While Musk mentioned that xAI has been helpful in advancing Tesla’s technology and data center, details about the specific contributions of Grok to Tesla’s driving technology were not provided during the call.
xAI, founded in March last year and publicly discussed by Musk in July 2023, focuses on developing large language models and AI software products to rival industry leaders such as Google, Microsoft, OpenAI, Meta, and others. The company’s first product, Grok, aims to offer unique features compared to existing chatbots like OpenAI’s ChatGPT, Google’s Bard, and Microsoft’s Bing. Musk has positioned Grok as a politically incorrect and witty alternative to traditional chatbot offerings.
Prior to the $5 billion investment proposal by Musk, xAI had already raised a $6 billion series B funding round and achieved a post-money valuation of $24 billion. This indicates that the startup has garnered significant interest and financial backing from investors. Questions remain about why Musk did not choose to incubate xAI within Tesla originally and how this potential investment could affect both companies’ future trajectories.
Elon Musk’s proposal for Tesla to invest $5 billion in xAI has raised eyebrows and generated discussions about the potential impact on both companies. As Tesla continues to navigate challenges in its core automotive segment and pursue innovative technologies like Full Self-Driving, the decision to invest in xAI could have far-reaching implications for the future of both companies. Shareholders and industry observers will be closely watching how this proposal unfolds and whether it aligns with Tesla’s long-term strategic goals.
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