Hajra Naz
Three weeks after Elon Musk’s AI startup xAI announced a massive $20 billion Series E funding round, one major investor has now been confirmed: Tesla.
In a letter to shareholders released Wednesday, Tesla disclosed that it invested $2 billion in xAI, the company behind the Grok chatbot and the owner of Musk’s social media platform, X. Other previously named backers include Valor Equity Partners, Fidelity, the Qatar Investment Authority, and strategic investors Nvidia and Cisco.
The investment is notable and controversial because Tesla shareholders voted against a similar move last year. In November, investors were asked in a nonbinding vote whether the Tesla board should be allowed to invest in xAI. While more shares were cast in favor than against, a large number of abstentions, which count as “no” votes under Tesla’s bylaws, caused the proposal to fail.
Despite that outcome, Tesla moved forward with the investment anyway and used its latest earnings materials to explain why.
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According to the shareholder letter, the decision is tied to Master Plan Part IV, Tesla’s most recent strategic roadmap. The company argues that xAI’s work on digital AI products complements Tesla’s push to bring artificial intelligence into the physical world.
“As outlined in Master Plan Part IV, Tesla is building products and services that bring AI into the physical world,” the letter states. “Meanwhile, xAI is developing leading digital AI products and services, such as its large language model, Grok.”
As part of the investment, Tesla and xAI also signed a framework agreement designed to explore deeper AI collaboration. That relationship already exists in practice. Tesla supplies Megapack batteries to power xAI’s data centers, and Grok has been integrated into some Tesla vehicles. Bloomberg has also reported that xAI has discussed building AI systems for humanoid robots like Tesla’s Optimus.
Musk addressed the decision directly during Tesla’s earnings call, framing the investment as a way to move faster.
“There are many things Tesla can do internally,” he said. “But if there are things xAI can help accelerate, then why wouldn’t we do that?”
Tesla highlighted those ambitions in its shareholder letter, pointing to continued development of Optimus robots, autonomous driving systems, semitrucks, and other AI-powered products. While the company beat Wall Street expectations on revenue and earnings, its profit fell 46% last year.
“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,” the company said.
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The xAI investment is expected to close in the first quarter.
Looking ahead, Musk and Tesla CFO Vaibhav Taneja warned investors to expect more heavy spending as the company ramps up autonomy and robotics.
“This year is about taking the first major steps toward large-scale vehicle autonomy and producing Optimus robots,” Musk said. “We’re making very big investments deliberately because we’re building toward an epic future.”
