Tesla is, for the most part, one of Elon Musk’s companies that is doing fairly well. On the flip side of that coin, we’ve got xAI, his artificial intelligence company. The two have been linked for some time, but we are now getting a better idea of what that relationship will look like. Basically, Tesla is going to hand over some of its revenue for access to xAI’s technology and resources — furthering the incestuous nature of Musk’s companies.
The Austin, Texas–based automaker is going to license xAI’s AI models to help power its driver-assistance system, “Full Self-Driving,” according to The Wall Street Journal. But wait, that’s not all! xAI is also going to make its own AI voice assistant thing that I’m sure will work really well every single time. This is all according to folks who spoke anonymously with WSJ.
As expected, the exact terms are still up in the air between Musk’s two companies. Apparently it’ll end up depending in part on how extensively Tesla relies on xAI’s tech rather than its own. xAI executives have reportedly discussed an even revenue split from Tesla’s FSD. That’s a big deal for a company like xAI. Musk, of course, denied that any of this is happening, according to The Wall Street Journal:
After this article was published, Musk replied on X to a user’s summary of it by saying: “Haven’t read the article, but the above is not accurate,” and that “there is no need to license anything from xAI.” Shortly after, he posted “WSJ is talking nonsense.”
Regardless of whether or not he is lying, Musk has a lot riding on the success of Full Self-Driving and autonomy — including the mythical robotaxi that is supposed to be coming in about a month.
Musk has promised for years that FSD will advance enough to make all Teslas fully autonomous and suggested that success could turn Tesla into a multitrillion-dollar company. Musk also has said Tesla would be worth “basically zero” without full autonomous driving.
Here’s a little bit more about Tesla’s relationship with xAI and the ways Musk’s companies interact with each other in general, from The Wall Street Journal:
Musk is already shifting talent and hardware between xAI and Tesla as he plays catch-up in the AI race, raising concerns about potential conflicts of interest. There is particular scrutiny around how Musk shares resources of Tesla, which is publicly traded. Several Tesla shareholders have filed suits claiming that the shift in resources to xAI has hurt the carmaker’s investors. The cases are pending in the Delaware Court of Chancery.
xAI has hired employees from Tesla, including several who have worked directly on the Autopilot team focused on developing self-driving capabilities. Musk also diverted thousands of hard-to-get Nvidia GPUs from Tesla to xAI last year. After that move became public, Musk said that “Tesla had no place to send the Nvidia chips to turn them on, so they would have just sat in a warehouse.”
In pitches to investors, xAI representatives have described the company as a future crucial technology provider for Tesla’s suite of software products, the people familiar with the possible revenue-sharing agreement said.
In a July post, Musk asked X users whether Tesla should invest $5 billion into xAI. Two days later, he posted: “Looks like the public is in favor. Will discuss with Tesla board.”
Musk has historically awarded companies that help his other businesses with their equity. Musk previously said he would give investors in his $44 billion X acquisition a quarter ownership in xAI. Grok, xAI’s chatbot, is integrated into X, and the two companies share some resources.
“Tesla is learning quite a bit from xAI,” Musk said on a July conference call with investors after the company reported earnings. “It’s been actually helpful in advancing Full Self-Driving and in building up the new Tesla data center.” He also said there were opportunities to integrate xAI’s Grok chatbot into Tesla’s software.
It all just sort of feels like Musk is using Tesla’s mountains of cash to keep his AI dream alive. But, what do I know?
Back in May, xAI raised $6 billion at a $24 billion valuation from investors. Fast forward to this month, and it has launched a data center in Tennessee that the company calls “Colossus.” Musk has dubbed it “the most powerful AI training system in the world.”
Separate from xAI, WSJ says Tesla is also planning to spend $10 billion this year to build out its own AI capabilities. It has been spending big money developing special chips for its “Dojo” supercomputer along with data centers in Buffalo, Palo Alto and Austin. xAI and Tesla’s employees have advised each other on the design and construction of these data centers.
