Tesla's Potential Investment in xAI: A Shareholder Vote Awaits

Tesla CEO Elon Musk has indicated that the decision to invest in xAI, a project he is associated with, will be made through a shareholder vote. This potential investment could align Tesla with advanced artificial intelligence developments, a sector Musk has consistently shown interest in. Based on analyst estimates, the average target price for Tesla is $293.64, implying a 6.34% downside from the current price of $313.51. The average brokerage recommendation is 2.7, indicating a "Hold" status.

Tesla CEO Elon Musk has hinted that the decision to invest in xAI, an AI startup he is associated with, will be subject to a shareholder vote. This potential investment could align Tesla with advanced artificial intelligence developments, a sector Musk has consistently shown interest in. Based on analyst estimates, the average target price for Tesla is $293.64, implying a 6.34% downside from the current price of $313.51. The average brokerage recommendation is 2.7, indicating a "Hold" status.

The investment structure involves SpaceX contributing $2 billion to xAI, part of a $5 billion equity raise. This landmark deal, announced on July 12, 2025, represents a pivotal moment in the consolidation of Musk's business empire and the broader AI landscape [1]. The investment creates unprecedented synergies across Musk's companies, including SpaceX, Tesla, X (Twitter), and xAI, marking a vertical integration strategy that could redefine the AI industry.

Tesla's potential alignment with xAI could enhance its AI capabilities, particularly in the Full Self-Driving (FSD) system. Tesla's FSD system, which has already accumulated over 1.2 billion miles on autonomous mode, relies on neural networks trained on real-world driving data. This system, which includes features like Auto Lane Change, Navigate on Autopilot, and Smart Summon, is set to become even more sophisticated with the integration of xAI's advanced AI models [2].

The investment also signals SpaceX's transformation from a launch provider to an AI-powered space technology company. This strategic move is aimed at leveraging AI for mission planning, satellite optimization, and autonomous spacecraft. Additionally, SpaceX's strong cash position, bolstered by Starlink revenue, could provide significant capital to xAI, facilitating massive GPU purchases and expansion [1].

However, the deal is not without risks. Regulatory scrutiny and resource allocation issues, particularly regarding the diversion of Nvidia chips from Tesla to xAI and X, could pose challenges. Musk's recent request to Nvidia to ship thousands of AI chips reserved for Tesla to xAI and X has drawn attention and may face shareholder objections [1].

For investors and financial professionals, this deal signals that the AI wars are entering a new phase where industrial integration trumps pure-play AI development. The company that controls the full stack—from chips to applications to distribution—may ultimately win the AI race.

References:
[1] https://fourweekmba.com/spacexs-2-billion-strategic-investment-in-xai-a-deep-dive-analysis/
[2] https://www.digitalgravity.ae/blog/tesla-ai-for-full-self-driving/