Elon Musk Asks X Before Shareholders: Should Tesla Invest $5 Bn in xAI?

Key Takeaways

• Elon Musk created an X poll asking whether Teslas should invest $5 billion in xAI.
• The AI startup was founded by Musk as a rival to OpenAI.
• To date, xAI has raised $6 billion at a $24 billion valuation.

Elon Musk is known for using X to gauge opinions about Tesla, often before he puts his ideas to shareholders.

In the latest example of this quirk, Musk used an X poll  to “test the waters” on whether Tesla should invest $5 billion into his AI startup xAI.

Musk’s AI Startup

Founded in July 2023, xAI is Musk’s answer to OpenAI and reflects his long-standing concerns about the direction of AI development.

Since stepping away from OpenAI in 2018, Musk has made no secret of his disdain for the company, and the beef reached new heights earlier this year when he filed a lawsuit against the AI developer alleging breach of contract.

At times, the Tesla founder has accused rivals’ models of having a “woke” bias. In contrast, he has said  the goal of xAI is to build a “maximally truth-seeking” alternative to existing models.

How Much is xAI Worth?

To date, xAI has raised $6 billion at a $24 billion valuation , a figure matched by only a handful of AI labs. 

Backed by investors including Andreessen Horowitz, Sequoia Capital, and Kingdom Holding, the company recently launched its own AI training supercomputer that ranks among the most powerful in the world.

An additional injection of capital from Tesla would equip xAI with significant cash reserves at a time of explosive AI spending.

The AI Funding Boom

Propelled by massive Big Tech investments and a ready supply of cash from venture capitalists, AI startup funding has grown significantly in recent years.

When Andreessen Horowitz recently raised $7.2 billion across five new funds, it immediately fenced off $2.25 billion to invest in new AI ventures. And according to Crunchbase, in the first half of 2024, more than $35.5 billion  was invested into AI startups globally, with 5 of the six largest rounds secured by AI companies.

With valuations ballooning, some investors have cautioned  that AI companies might be overvalued. But building the most advanced AI systems is expensive and developers aren’t waiting around to test the viability of the underlying business model.

Alongside the costs of model training resources, AI salaries are now among the highest in the tech industry.

According to Glassdoor, the average salary  for an AI Engineer in the US is over $200,000 annually. Meanwhile, the highest-paid researchers  at OpenAI, Anthropic and Inflection each receive over $800,000 a year.

Tesla and xAI Supercomputing Synergy

For Tesla, forming a partnership with xAI could enhance its already impressive AI capabilities. 

In recent years, the electric vehicle maker has shifted attention to the transformer architecture found in GPT-style language models, overhauling its self-driving systems to incorporate the new technology. 

Applying large generative models to the challenge of autonomous driving has increased Tesla’s need for computing power. In July 2023, the company launched Dojo,  an AI-training supercomputer equipped with 10,000 Nvidia H100 GPUs.

For its part, xAI’s new GPU supercluster consists of ten times as many H100s. While one is focused on processing video data and the other will likely be directed toward language-based training, the two projects create important synergies that could justify Tesla’s investment.