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Elon Musk desires to ask Tesla board for approval for $5 billion financing for xAI start-up

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Tesla CEO Elon Musk said he’ll seek board approval to speculate $5 billion in his AI startup xAI, potentially further connecting his network of technology firms.

On Tuesday, Musk posted a poll on his social network X asking: “Should Tesla invest $5 billion in @xAI, assuming the valuation is ready by several credible outside investors? (This requires board approval and shareholder vote, so that is only a test).”

On Thursday, when 68 percent of 958,086 votes were in favor of the proposal, he responded: “Looks like the general public is in favor. We will consult with the Tesla board about it.”

The automaker, which missed second-quarter earnings expectations and fell greater than 10 percent on Tuesday, is trying to remodel itself from an electrical vehicle maker right into a robotics and AI company.

Musk has promised to construct a fleet of autonomous “robotaxis” and humanoid robots powered by this technology.

On this week's quarterly earnings call, he said that “Tesla is learning quite a bit from xAI” when it comes to training its fully autonomous driving technology and constructing a brand new Tesla data center in Austin, Texas.

However, the investment, if it goes ahead, could raise latest questions on conflicts of interest amongst Musk's network of firms, which also includes spacecraft operator SpaceX and computer-brain interface developer Neuralink.

The CEO has admitted to diverting 1000’s of rare Nvidia chips from Tesla to X and xAI earlier this yr, and plenty of senior staff and engineers have moved between the businesses. Musk has denied any irregularities, saying the chips were reallocated since the automaker had not yet built the infrastructure to deal with the graphics processors.

The independence of Tesla's board has also been called into query. Earlier this yr, a court in Delaware voided a record $56 billion salary package awarded to Musk. It called the board members “servile servants of an overbearing master” and criticized CEO Robyn Denholm for “negligently handling her oversight duties.”

However, Musk won a shareholder vote last month to reaffirm his historic stock allocation and challenged the court's decision.

xAI was officially founded in July last yr and develops a chatbot called Grok. In May, it raised $6 billion at a valuation of $18 billion.

Musk desires to meet up with competitors OpenAI and Anthropic, that are setting the pace within the race to develop intelligent chatbots. The Tesla boss admitted in an interview this week that his top AI model is an “order of magnitude” weaker than OpenAI's.

ChatGPT maker OpenAI has raised more cash than its competitors thus far, with its important backer Microsoft alone committing $13 billion, people acquainted with the deal say. Musk – who helped launch OpenAI in 2015 but left the board in 2018 after disagreements with co-founder Sam Altman – is investing heavily to fill the gap.

Hungry for money, his startup is constructing what he calls a “gigafactory of computing power” in Memphis, equipped with 100,000 of the newest Nvidia graphics processors that can be used to coach and run large language models that form the premise of generative AI chatbots.

With a $5 billion injection of funding from Tesla, xAI would come near matching the firepower its larger competitor has built up in only 12 months of existence.

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