Three weeks ago, Elon Musk’s AI company, xAI, announced it raised $20 billion in a Series E funding round. Now, we know Tesla is one of the investors.
Tesla disclosed in a letter to shareholders someone invested $2 billion in xAI, the startup behind the Grok chatbot that they also own Musk X’s social media company. Apart before it is 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 for last year. In November, shareholders were asked in a non-binding manner to allow Tesla’s board to authorize an investment in xAI. About 1.06 billion votes were in favor, and 916.3 million were against, each reports Bloomberg in time. While it looked like an agreement, the number of abstentions — which are considered votes against Tesla’s regulations — meant the measure was rejected.
Tesla went ahead and presented arguments to support the investment. Tesla’s success appears to be tied to xAI’s alignment with its latest master plan in physical AI and robotics — and how the company will approach it.
“As stated in the Master Plan Part IV, Tesla builds products and services that bring AI to the physical world. Meanwhile, xAI develops superior digital AI products and services, such as large language models (Grok),” the shareholder letter said. “In that context, and as part of Tesla’s broader strategy in the Master Plan Part IV, Tesla and xAI also entered into a framework agreement related to the investment.”
In a letter to shareholders, Tesla emphasized other developments in physical AI and robotics, including plans for Optimus humanoid robots, semitrucks, and other autonomous capabilities. The company broadly beat Wall Street estimates on revenue and earnings, but profit fell 46% last year.
Tesla said the agreement builds on its existing relationship with xAI by “providing a framework for evaluating potential AI collaborations between companies.”
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“Together, the investment and related framework agreements are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale,” Tesla said in a shareholder letter.
The investment is expected to close in the first quarter.