Tesla investment in xAI would stretch beyond automotive roots
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Elon Musk has never liked Tesla being identified as purely a carmaker — and now he could distance the company even further from its automobile heritage with a deal to invest in his AI startup xAI.
Why it matters: Musk is proposing that Tesla help back xAI, which owns the social media platform X and the ChatGPT competitor Grok.
- Tesla investors will need to approve the deal in a shareholder vote, he said Sunday on X: "It's not up to me. If it was up to me, Tesla would have invested in xAI long ago."
State of play: The world's richest person has always described Tesla as a tech company with expertise in autonomy and robotics — not an automaker.
- Investors have largely agreed, putting the stock in a special elevated class apart from its automotive contemporaries.
The intrigue: Musk's endorsement of a Tesla investment in xAI comes days after high-profile Tesla bull and Wedbush Securities analyst Dan Ives floated the possibility of a merger between Tesla and xAI.
- "Adding Tesla's data to xAI would create a formidable AI play ... a frontrunner when it comes to AI and not launching from the backseat," Ives said. "There obviously are some concerns, but the benefits far outweigh the risks."
- Musk retorted: "Shut up, Dan."
- An investment would bring them closer together, though, without the regulatory hassles of a merger.
By the numbers: xAI is expected to burn about $13 billion in 2025 as it invests heavily in Grok, effectively necessitating the pursuit of outside partners, Bloomberg reported.
- The company is pursuing a valuation of up to $200 billion in its next fundraising round, FT and Reuters reported.
Between the lines: Tesla is not exactly a fountain of cash on its own.
- The company's vehicle sales have been plunging in 2025 amid a backlash to Musk's association with President Trump — but if he's concerned about the drop-off, he's not showing it.
- As WSJ noted earlier this month, Musk "has already moved beyond caring about cars."
- He's stated repeatedly that the company's future is predicated on autonomy — with all the value in the AI capability and none in actual car production.
Reality check: You can't have self-driving cars without the car part.
What's next: Tesla set its annual meeting in November, where investors will presumably vote on a possible xAI investment.
