Tesla investors sue Elon Musk for launching rival AI company

Several Tesla shareholders are accusing Elon Musk and the company’s board of knowingly diverting talent and resources from the company and directing them to Musk’s rival artificial intelligence company, xAI.

In a lawsuit, shareholders allege that Musk and the board breached their fiduciary duty to Tesla by launching xAI, which was founded in 2023 on the premise of understanding “the true nature of the universe.”

The plaintiffs filed the lawsuit in Delaware, where the company is still incorporated, just hours before Tesla shareholders voted on a proposal to reincorporate the company in Texas after a Delaware court judge voided Musk’s massive pay package. The process was first reported by Business Insider It is TechCrunch.

They note that for years, Musk has sought to position Tesla not as a car company, but as a powerhouse in robotics and AI. The allegation helped boost Tesla’s share price, resulting in the company’s value exceeding that of the major automakers combined.

Meanwhile, Musk was “diverting scarce talent and resources from Tesla to xAI and raising billions of dollars for xAI while promoting xAI’s access to Tesla’s AI-related data,” the suit says. Last week, xAI raised $6 billion in its initial round of funding, which it said it will use to bring its first products to market. So far, xAI has released Grok, a supposedly bolder version of OpenAI’s ChatGPT, which is available via X, but only to Premium subscribers.

The plaintiffs also cite a recent CNBC report about Musk ordering thousands of Nvidia-made AI chips destined for Tesla to be diverted to the social media company. In a post on He also estimated that Tesla would spend $3 to 4 billion on Nvidia’s AI chips in 2024.

They also cite other posts from Musk suggesting he needs a larger stake in Tesla – on the order of 25% – to feel comfortable turning Tesla into a leader in AI and robotics. The plaintiffs also accuse Tesla’s board of doing nothing, allowing Musk “to loot Tesla resources and divert them to xAI; and create billions in AI-related value at a company other than Tesla.”

This isn’t the only shareholder lawsuit emerging this week. An institutional investor sued the companyclaiming that Musk made billions of dollars selling Tesla shares using insider information.