Elon Musk Floats a New Source of Funding for xAI: Tesla

Elon Musk said Tesla shareholders would vote on investing in xAI, the latest move by the billionaire entrepreneur to tap his own companies to help fund his artificial-intelligence startup.“If it was up to me, Tesla would have invested in xAI long ago,” Musk said Sunday evening in a post on X, his social-media platform. “We will have a shareholder vote on the matter.”Musk’s comments come after The Wall Street Journal reported Saturday that his rocket company SpaceX had committed $2 billion toward a recent fundraising round for xAI.xAI requires billions of dollars to power servers as it tries to play catch-up in the global AI race, which has fast become one of the most costly endeavors of modern technology.OpenAI and other startups in the sector are rapidly burning through unprecedented levels of new funding as they develop and run large language models that need extensive training.But revenue is lagging well behind expenses—and sources of the funding may be limited. While OpenAI has had success raising tens of billions of dollars from SoftBank and Microsoft, xAI has lagged behind. The Musk-led company recently raised $5 billion of debt and $5 billion of equity—including the SpaceX money.As the needs for funding have grown, Musk’s image has taken a hit.Musk no longer wields vast influence over the federal government and his once-close relationship with President Trump has imploded into an open battle over his criticism of the debt-heavy federal funding bill.Earlier this month, Musk said he would form the America Party, a third party in the next election. He has also indicated that he would target members of Congress who campaigned on reducing government spending and then voted for Trump’s bill.While Tesla’s sales have fallen—its first-quarter revenue was down 9% from a year earlier—it still has plenty of money. The company reported $16 billion in cash as of March 31.Deals in which a CEO directs money to a related business with different shareholders are often controversial in America. By turning to SpaceX, Musk is effectively using cash from shareholders betting on his space and satellite company to fund his ambitions in AI.Musk previously faced extensive legal challenges to his successful bid to merge his Solar City solar-power company with Tesla.He has previously combined revenue and operations at his companies. Before he merged xAI and X, the artificial-intelligence company turned to the social-media business for data. Last week, he said that Grok, xAI’s chatbot, would soon be available in Tesla vehicles.Write to Eliot Brown at Eliot.Brown@wsj.com