Elon Musk Floats a New Source of Funding for xAI: Tesla

Yahoo

2 days ago

Elon Musk said Tesla shareholders would vote on investing in xAI, the latest move by the billionaire entrepreneur to tap his own companies to help fund his artificial-intelligence startup.
'If it was up to me, Tesla would have invested in xAI long ago,' Musk said Sunday evening in a post on X, his social-media platform. 'We will have a shareholder vote on the matter.'
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Musk's comments follow a Wall Street Journal report on Saturday that said SpaceX, his rocket company, had committed $2 billion toward a recent fundraising round for xAI.
The turn inward for investment comes as xAI requires billions of dollars to power servers as it plays catch up in the global AI race, which has fast become one of the most costly endeavors of modern technology.
OpenAI and other startups in the sector are rapidly burning through unprecedented levels of new funding as they develop and run large language models that need extensive training.
But revenue is lagging well behind expenses—and sources of the funding may be limited. While OpenAI has had success raising tens of billions of dollars from SoftBank and Microsoft, xAI has trailed.
The Musk-led company recently raised $5 billion of debt and another $5 billion of equity—including the SpaceX money. It is the rocket maker's first known investment into xAI and one of its largest in another company.
Musk has repeatedly mobilized other parts of his business empire to boost xAI, which earlier this year merged with X. The merger valued the new company at $113 billion.
In an X post early Monday, Musk said he wasn't supportive of a merger between xAI and Tesla.
The latest version of xAI's Grok chatbot has earned high marks from AI-benchmarking service Artificial Analysis for its performance, though it hasn't gained nearly as much traction as OpenAI's ChatGPT. It also has had its share of controversies: Last week it published a series of posts praising Adolf Hitler.
The funding drive for the AI startup comes as Musk's influence has taken a hit.
Musk no longer wields power over the federal government following the implosion of his once-close relationship with President Trump. The bromance has turned into an open battle after Musk's criticism of the president's debt-heavy federal tax and spending bill.
Earlier this month, Musk said he would form the America Party, a third party in the next election. He has also indicated that he would target members of Congress who campaigned on reducing government spending and then voted for Trump's bill.
The prospect of Tesla potentially backing xAI also comes as the electric-vehicle maker is beset with its own problems. The company recently reported a 13.5% fall in global vehicle sales for the last quarter and missed delivery forecasts. It is also facing increasing challenges in China.
Still, while Tesla's sales have fallen, the company has plenty of money. It reported $16 billion in cash as of March 31.
Deals where a chief executive directs money to a related business with different shareholders are often controversial in corporate America, given the concerns that one set of investors could be harmed at the expense of another. By turning to SpaceX, Musk is effectively using cash from shareholders betting on his space and satellite company to fund his ambitions in AI.
It isn't the first time SpaceX's funds have been used in this way.
Musk personally borrowed $20 million from the company to help fund Tesla early in its history and used SpaceX's equipment to set up his tunneling venture, the Boring Company, drawing ire from some SpaceX investors. More recently, he turned to SpaceX for a $1 billion loan around the time he was acquiring what was then-called Twitter, which he paid back shortly after it out.
Musk also faced extensive legal challenges to his successful bid to merge his Solar City solar-power company with Tesla.
Write to Eliot Brown at [e-mail]
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