Investing.com - Elon Musk, CEO of Tesla Inc (NASDAQ:TSLA), announced on Thursday that he and the board of the electric vehicle company will discuss a potential $5 billion investment in his artificial intelligence startup, xAI.
Musk, known as the world's richest person, launched xAI last year to compete with Microsoft-backed OpenAI. This move has led to worries that resources from Tesla might be diverted to support the AI startup.
Despite the concerns, the idea has garnered significant support from Musk's fans. On Tuesday, Musk conducted a poll on the social media platform X, asking users if Tesla should invest $5 billion in xAI. Over two-thirds of nearly 1 million respondents voted in favor, though it remains unclear how many of those voters are Tesla investors.
The poll came shortly after Tesla disclosed that its second-quarter automotive gross margin and profit fell short of Wall Street expectations, due to price cuts and sales incentives.
"Looks like the public is in favor. Will discuss with Tesla board," Musk posted on X on Thursday.
During Tesla's earnings conference call on Tuesday, Musk mentioned that xAI could advance Tesla's full self-driving technology and support the development of a new data center. He also noted opportunities to integrate xAI's chatbot, Grok, with Tesla's software.
Although there is substantial investment in AI firms, many of them, including xAI, are still in the process of developing sustainable business models, while incurring significant technology costs.
Brent Goldfarb, a business school professor at the University of Maryland, expressed skepticism about the investment, suggesting that it might not be in the best interest of Tesla shareholders. "In AI in general, nobody is quite sure where the money is going to be made and who is going to pay for it. AI right now has all the signs of a bubble," Goldfarb said.
Musk left OpenAI, which he co-founded, in 2018 due to potential future conflicts with Tesla, which is also developing AI software for self-driving vehicles.
In April, Musk stated that xAI is hiring some engineers from Tesla to retain talent, amid competition from OpenAI. xAI raised $6 billion in a Series B funding round in May, reaching a post-money valuation of $24 billion. Its investors include Andreessen Horowitz and Sequoia Capital.
Musk has also mentioned plans for a quarter of xAI to be owned by investors in X, a social media firm he acquired for $44 billion. The value of X has since decreased.
Musk has faced criticism in the past for potential conflicts of interest among his various companies. Some Tesla shareholders previously argued that the 2016 $2.6 billion acquisition of SolarCity, a struggling rooftop solar company founded by Musk and his cousins, amounted to a bailout. However, the Delaware Supreme Court ruled last year that Musk did not compel Tesla to overpay for SolarCity.