Tesla has considered an arrangement that would license AI models from CEO Elon Musk’s AI startup, xAI, according to WSJ.
It would be the latest in a number of conflicts of interest that have cropped up related to Musk’s channeling of resources from Tesla, a public company, to xAI, his own privately-held company, though Musk denied the report without reading it.
For many years now, Tesla and Musk have promised that Tesla cars would have full self-driving capability in the near future. Deadlines have been constantly pushed back, suggesting that the problem of self-driving is harder than Tesla originally thought it is.
But that hasn’t stopped the company’s public optimism, with Musk promising just over a month ago that he would be shocked if Tesla doesn’t have unsupervised full self-driving next year.
Musk talks up Tesla’s AI expertise
Musk has also talked up Tesla’s AI efforts, with the company hosting “AI Day” events in 2021 and 2022. Both events came before xAI was founded in 2023, after which Tesla has not hosted another AI Day.
One of Tesla’s major AI efforts has been its Dojo supercomputer, which it has claimed is one of the most powerful supercomputers in the world.
Musk has even said that Tesla already has “baby AGI,” meaning artificial general intelligence, or the hypothetical idea of a computer that is capable of doing not just a single task well, but mimicking the skills of a human across a broad array of tasks. Scientists question whether AGI is even possible, but that hasn’t stopped Musk from claiming that Tesla has already achieved it.
Musk also said in recent months that Tesla’s leadership in FSD, AI and specifically its Optimus humanoid robot, could lead to an increase of tens of trillions of dollars in market cap for the company.
All of this has led Musk to make some rather serious pronouncements, such as suggesting that if an investor doesn’t think Tesla will be the company to solve autonomous driving, then they should not invest in the company, and that Tesla is worth “basically zero” without FSD.
If Tesla’s so good at AI, why rely on xAI?
And so, given Tesla’s clear AI supremacy, it seems odd that Tesla would need to lean on another company – xAI – that’s just over a year old.
Not only is xAI a newer player in the space, it has also relied on Tesla for many resources. Musk has already poached talent from Tesla to xAI, discussed investing $5 billion of Tesla money into xAI, and shifted priority shipments of H100 GPUs (the chips used for AI calculations) from Tesla to xAI.
All of this was done despite Musk having a fiduciary duty to Tesla’s shareholders, whereas his duty in xAI is primarily to himself, as the company is privately owned by him.
These conflicts of interest didn’t stop Musk from threatening to move AI efforts to xAI rather than Tesla if he wasn’t given more ownership of Tesla (which he felt necessary after selling many of his Tesla shares to buy twitter). He made that threat in the run-up to the shareholder vote to reinstate his illegal pay package, and despite that vote passing, he has apparently not stopped shifting efforts from Tesla to xAI.
The matter is currently subject to a shareholder lawsuit alleging that Musk is unduly channeling money and resources from his public company into his own private coffers.
Tesla now reportedly considering sharing FSD revenue with xAI
The latest move was reported over the weekend by Wall Street Journal, citing “people familiar with the matter,” who say discussions have been had around licensing xAI’s software for FSD, and using xAI to help develop voice assistance features for Tesla cars and for Optimus robots.
In exchange for this help, xAI executives have suggested an even revenue-sharing split from Tesla’s FSD.
Currently, Tesla charges $8,000 for its FSD software, down from a peak of $15,000. Musk has previously said that as FSD becomes more capable, the price and value of the software will only rise, claiming that Teslas will be “appreciating assets” as a result.
Revenue from FSD is currently a big chunk of Tesla’s total revenue, but much of it has been deferred as the software is not yet fully capable of what has been promised.
And so the FSD system (and future products like the soon-to-be-unveiled Robotaxi) comes along with a big promise of future Tesla revenue – and if a chunk of that is sent to xAI, rather than to Tesla, that would be a big hit against expected future revenues for Tesla.
Musk denies WSJ’s claim, without reading it
For his part, Musk denied WSJ’s claim, but admitted that he did so without reading the article in question. Instead, he responded to an unrelated twitter user’s summary rather than the article itself, showing his disinterest in reading information on a platform that doesn’t algorithmically cater exclusively sycophantic content into his feed.
Musk has previously denied other media claims that turned out to be true, such as Reuters’ report that the Model 2 would be de-emphasized in favor of Robotaxi.
But even within his denial, he admits that Tesla, the longtime AI/self-driving company which he claims has already achieved “baby AGI,” is learning from his nascent private AI startup which does not have nearly the history with autonomy that Tesla has.
This could be concerning that Tesla has had slower progress than a new startup – or could be a reflection of the fact that Musk has been channeling resources from the former to the latter.
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