Tesla will invest $2B in Elon Musk’s xAI

Three weeks ago, Elon Musk’s AI company, xAI, revealed that it had raised $20 billion in a Series E funding round. Now we know that Tesla is among the investors.

Tesla was exposed in a letter to shareholders On Wednesday it invested $2 billion in xAI, the startup behind the Grok chatbot that it also owns. Musk X’s media company. Other it has already been revealed Investors in xAI include Valor Equity Partners, Fidelity, Qatar Investment Authority, as well as Nvidia and Cisco as “discretionary investors.”

This is a circular agreement and one that Tesla owners voted on last year. In November, shareholders were unanimously asked to allow Tesla’s board to approve the sale to xAI. About 1.06 billion votes were in favor, and 916.3 million were against, on Bloomberg reports at that time. While this may seem like approval, the number of abstentions — which count as votes against Tesla’s rules — meant the measure was rejected.

Tesla went ahead and made an argument, both in its shareholder letter and during its earnings call, in support of the investment. Tesla’s justification seems to be tied to xAI’s connection to its latest plan — and how the industry is about to get even closer.

“As described in the Master Plan Part IV, Tesla is building products and services that bring AI to the physical world. Currently, xAI is developing advanced digital AI products and services, such as its main language model (Grok),” the shared letter reads. “In this context, and as part of Tesla’s broader strategy under the Master Plan Phase IV, Tesla and xAI have also entered into a financing agreement.”

Tesla said the partnership builds on its existing relationship with xAI by “providing a way to evaluate the potential use of AI between companies.” Tesla already offers its Megapack batteries to power xAI data, Musk said confirmed last yearand company has included xAI chatbot Grok in some of its cars. Bloomberg he said again that xAI told investors that it plans to develop AI for humanoid robots like Tesla’s Optimus.

Musk noted that there is much work Tesla can do internally. “But if there are things that xAI can do to further our progress, then why shouldn’t we?” he asked. “That is the reason why we have gone ahead with such investments.

In its letter to shareholders, Tesla highlighted these and other developments in physical AI and robotics, including plans for its Optimus robot, semitrucks, and other autonomous capabilities. The company beat Wall Street estimates on earnings and revenue, but profit it was down 46% last year.

“Together, the investment is a joint venture aimed at advancing Tesla’s ability to develop and deliver AI products and services to the world,” Tesla said in a joint statement.

The fund is expected to close in the first quarter.

Musk and Tesla CFO Vaibhav Taneja signed on at a time when the company found it was hoping for more money to support its operations.

“This year for Tesla is a big step forward as we increase autonomy and begin mass production of Optimus robots – we’re making huge investments,” Musk said on the call. “That’s why this is going to be so big here; on purpose, because we’re making a lot of money for the future.”