Tesla Shareholders to Vote on Investing in Elon Musk's AI Startup xAI

Tesla shareholders are set to vote on a proposal that could allow the electric vehicle maker to invest in Elon Musk's AI startup, xAI. This move is pitched as a way to strengthen Tesla's ambitions in AI, robotics, and energy.

Listed in Tesla's proxy statement alongside a company-backed push to raise Musk's 10-year pay package to $1 trillion, the proposal comes from Stephen Hawk, a Florida shareholder with a $2,000 stake. His supporting statement emphasizes the benefits:

Tesla's integration of Grok into its vehicles demonstrates the tangible benefits of collaboration with xAI. As Tesla pivots toward AI-driven technologies, including Full Self-Driving and robotics, a strategic investment in xAI would secure access to advanced AI capabilities, enhance product innovation, and drive shareholder value.

The board is neutral on this proposal, unlike its usual stance against shareholder initiatives.

If approved, this would be the second of Musk's companies to invest in xAI, following SpaceX's commitment of $2 billion as part of a $5 billion equity raise. Analysts speculate this could indicate challenges in raising external funds for xAI. (Musk also merged X with xAI earlier this year.)

Some shareholders argue that xAI is a rival to Tesla, given Musk's description of Tesla as an AI company. Last year, a lawsuit was filed but dismissed.

This vote comes amid Tesla's struggles with weakening EV sales and a slow robotaxi rollout. The company is shifting focus to its AI efforts, including autonomous vehicles and the Optimus humanoid robot.

Musk has stated that he needs more control in Tesla to lead AI efforts without distraction. Shareholders will also vote on a compensation plan that could give him over 25% control.

The filing coincides with Tesla's appeal of a Delaware judge's decision on Musk's previous $56 billion pay package. The new plan ties compensation to ambitious goals, such as increasing Tesla's market value from about $1 trillion to over $8 trillion.

Gene Munster, managing partner at Deepwater Asset Management, commented: "Tesla's not going to get to $8 trillion market cap based on FSD and robotaxi. To get to that $8 trillion, you kind of need xAI. We're talking numbers that have historically been inconceivable. To get to those, we need things to happen that are inconceivable right now. And one of them is humanoid robots everywhere; that's probably the biggest lever."

He added that xAI could boost Tesla's valuation through excitement, potential returns, and access to resources like compute.

The shareholder vote is scheduled for November 6 at 3 p.m. central time at Tesla's Gigafactory Texas and will be streamed live here.