Three weeks ago, Elon Musk's AI company, xAI, revealed it raised $20 billion in a Series E funding round. Now, we know Tesla is among its investors.
Tesla disclosed in a letter to shareholders on Wednesday that it invested $2 billion in xAI, the startup behind the Grok chatbot that also owns Musk's social media company X. Other previously disclosed investors in xAI include Valor Equity Partners, Fidelity, Qatar Investment Authority as well as Nvidia and Cisco as "strategic investors."
This is a truly circular deal and one that Tesla shareholders voted against last year. In November, shareholders were asked in a non-binding measure to allow the Tesla board to authorize an investment in xAI. About 1.06 billion votes were in favor, and 916.3 million opposed, per Bloomberg's reporting at the time. While that would seem like an approval, the number of abstentions -- which count as votes against in Tesla's bylaws -- meant the measure was rejected.
Tesla proceeded anyway and offered up an argument in support of the investment. Tesla's justification appears to be tied to xAI's alignment with its most recent master plan in physical AI and robotics -- and how these companies are about to get a lot closer.
"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. "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."
In the letter to shareholders, Tesla stressed its other developments in physical AI and robotics, including plans for its Optimus humanoid robot, semitrucks, and other autonomous capabilities. The company broadly beat Wall Street estimates on earnings and revenue, but profit fell 46% last year.
Tesla said the agreement builds upon an existing relationship with xAI by "providing a framework for evaluating potential AI collaborations between the companies."
"Together, the investment and the related framework agreement are intended to enhance Tesla's ability to develop and deploy AI products and services into the physical world at scale," Tesla said in the shareholder letter.
The investment is expected to close in the first quarter.
