Tesla Shareholders to Vote on $20 Billion xAI Investment

Elon Musk's business empire is increasingly channeling its financial resources towards artificial intelligence (AI). The billionaire announced on Sunday that he plans to have Tesla shareholders vote on whether the company should invest in xAI, an AI enterprise founded two years ago. It is reported that SpaceX, the space transportation company, has recently agreed to invest approximately 20 billion in xAI. The CEO expressed that he does not support the merger of xAI with other companies but hopes that Tesla investors can share the growth dividends of xAI. In March of this year, xAI was acquired by the social platform X through a full-stock transaction, with a valuation of 113 billion. However, it is not clear how the investments from multiple companies under the CEO will curb the company's monthly expenditure of 10 billion. xAI is currently attempting to develop advanced AI models to compete with rivals such as OpenAI, but it has yet to establish a foothold among large enterprise clients or build a core position within the developer community.

xAI is expected to consume approximately 130 billion in funds for the entire year, meaning the company's current aggressive fundraising pace can only barely keep up with its expenses. To extend xAI's financial "runway," the CEO has created a cross-held, mutually supportive "system" of enterprises. However, not all Tesla shareholders are willing to see this 1 trillion market value electric vehicle company become the CEO's "cash pool" at will. Additionally, xAI's chatbot, Grok, is facing controversy. Last Friday, Grok issued a lengthy apology statement on X after the model previously released content praising Hitler and the Holocaust.

Despite being the world's highest-valued automaker, Tesla's stock price has declined by approximately 22% year-to-date due to factors such as declining sales and the CEO's involvement in politics. The CEO of Laffer Tengler Investments stated that if Tesla invests in xAI, it will "further impact its already sliding electric vehicle business." However, she believes that the investment will ultimately likely gain shareholder approval due to the high loyalty many investors have towards the CEO. The CEO and senior management are discussing the construction of a vertically integrated AI infrastructure. To achieve this goal, xAI will need global distribution capabilities and high-speed connectivity, and the more than 7,000 Starlink satellites operated by SpaceX may be the key infrastructure.

A senior stock analyst pointed out that if the CEO can clarify that xAI will benefit Tesla's AI development in the future, then Tesla's investment would be reasonable. However, if the CEO continues to assert that xAI and Tesla's AI are completely different, then investing in xAI would only make sense at the private equity level, provided the board believes xAI's future valuation will increase. Otherwise, the Tesla board should reject this opportunity.