Elon Musk is leveraging his entire empire to support xAI.
Elon Musk has big plans for his xAI startup. One of them is to use the rest of his empire to help him grow.
The year-long artificial intelligence project relies heavily on talent, data and hardware from other companies. So far, xAI has hired at least 11 former Tesla employees, according to the xAI website and LinkedIn profiles. Computer chips crucial to AI — called graphics processing units, or GPUs — from social media platform X are also being used to develop xAI.
Tesla’s dedicated GPUs have been redirected to xAI and X. Elon Musk also made public the image data Tesla has collected – which he said can be used as a training resource for xAI models. X shareholders will own 25% of xAI.
“xAI is a fairly new company,” Musk said in an interview with Canadian psychologist Jordan Peterson. “So we have a lot of catching up to do to catch up to companies that have been around for five, 10, or 20 years.”
Many have argued that the move to pool human resources and hardware for xAI will deprive Musk’s remaining companies of the benefits. In response, Musk has said that such sharing is beneficial to all investors.
“We are a separate company from X, but will work closely with X (Twitter), Tesla and other companies to make progress on our mission,” said an X.AI representative.
Still, at least three Tesla shareholders have filed lawsuits, claiming that shifting resources to xAI has harmed the automaker’s investors. The lawsuits are pending in Delaware Chancery Court.
“This is going to be a problem,” said Brian Quinn, a law professor at Boston College. “Using the resources of any company means Musk is touching other people’s money. He can’t treat all of this as personal property.”
Just last month, Musk posted a poll on X asking users whether Tesla should invest $5 billion in xAI. After X users voted 68% in favor of the move, Musk posted: “Looks like the public is in favor. Will discuss with Tesla board.”
Musk has previously said that hiring from his other companies for xAI is a way to prevent a brain drain. Employees from SpaceX, the rocket startup; Neuralink, the brain implant chip company; and tunneling company Boring Co. and X have all helped each other.
When Musk bought X in 2022, he brought in employees from across his business empire to help. In court testimony, Musk said Tesla engineers helped out voluntarily after hours.
“Does Tesla no longer need those engineers?” a lawyer asked him.
“No. Tesla needs engineers,” Musk replied.
One of Tesla’s board members testified in court that engineers were paid for that extra work.
xAI has also leveraged its ties to Musk’s corporate network to raise $6 billion in recent months. Investors in xAI said they were drawn to the idea that xAI could use data from Musk’s empire, including Tesla, to train large language models.
xAI is now valued at $24 billion, second only to OpenAI among AI startups in size. Musk co-founded OpenAI in 2015 and stepped down from the company’s board of directors in 2018.
Since launching in July 2023, xAI has released a chatbot called Grok and is building what Musk calls the world’s largest data center. Musk’s track record of building businesses has earned him the loyalty of some investors.
Still, some are angry about the overlap. Tesla shareholders behind the recent lawsuits are accusing Musk of breaching his fiduciary duty by diverting resources to xAI. They’re seeking damages and hoping the court will order Musk to transfer his shares in xAI to Tesla.
Sharing resources between companies is not illegal if each entity is fairly compensated. However, such arrangements are rare among large corporations and are considered dangerous.
“The law doesn’t prohibit people from having fiduciary responsibilities to multiple companies,” said Scott Cummings, a law professor at the University of California, Los Angeles. “What the law prohibits is someone harming one company for the benefit of another.”
Tesla and xAI both have separate AI ambitions, so the companies are in a tough spot when it comes to competing for resources. Tesla is trying to develop fully autonomous driving software and humanoid robots, in addition to selling electric cars.
One of the lawsuits, filed by the Cleveland Bakers and Teamsters pension fund, is targeting the reallocation of GPUs between companies. According to the complaint, “Musk is creating enormous value in xAI—potentially worth hundreds of billions of dollars in the near future—at Tesla’s expense.”
Previously, WSJ also reported that X contributed $250 million to xAI’s computing power. xAI’s Grok was made available exclusively on X. xAI engineers were also tasked with troubleshooting X and using xAI’s models to improve features.
“Grok is designed to answer questions in a humorous and rebellious way. Please do not use it if you hate humor!”, X.AI representatives wrote on the website, adding: “This chatbot will also answer all the difficult questions that other AI systems refuse to answer.”
With Grok, X.AI aims to compete directly with OpenAI, the company behind ChatGPT. X.AI itself will also compete with Google’s Bard chatbot and Anthropic’s Claude chatbot.
