The overall view of Tesla Inc. was summed up in a single line from a report this summer by one of the more holistic analysts covering the company: “The car is to Tesla what the video game chip is to Nvidia. The car is to Tesla what selling books is to Amazon.” Morgan Stanley’s Adam Jonas was arguing that Tesla is transforming from a maker of electric vehicles into an artificial intelligence and robotics powerhouse. On this reading, Tesla is not just a box on wheels with batteries, but an AI-delivery vehicle. Chief Executive Elon Musk also preaches this thesis, declaring with characteristic bravado: “If someone doesn’t believe that Tesla is going to solve autonomy, I think they shouldn’t be an investor in the company.”
It’s worth putting an asterisk on that statement. This weekend, the Wall Street Journal reported that Musk’s artificial intelligence company xAI, a subsidiary of his social media behemoth X, is likely to license its models to aid Tesla’s autonomous driving ambitions in exchange for a revenue-sharing deal. Musk dismissed the story in a series of tweets, including calling it “nonsense.”
On the other hand, only five months ago, Musk accused Reuters of “lying” when it reported that Tesla had canceled plans for an EV model priced below $30,000, but soon after that the company announced a shift from very cheap EVs to robotaxis. Also, Musk has already asked the group of impartial sages known as his followers whether Tesla should invest $5 billion in xAI (most answered in the affirmative).
That flapping sound you hear is the sound of the wind blowing through the red flags.
Musk has a habit of treating his separate companies as part of an integrated entity. The biggest example was Tesla’s 2016 acquisition of SolarCity Corp., under which the EV company bought a spiraling rooftop solar business that Musk was chairman of, owed him (and SpaceX) money for, and was run by his cousin. Even Jonas later described that deal as a “controlled implosion.” When Musk first bought Twitter Inc., which became X, he called in engineers from Tesla to review its code. A few months earlier, he redirected thousands of Nvidia Corp. chips destined for Tesla to xAI, explaining it as a logistical hiccup.
If Tesla does indeed now invest billions of dollars in xAI, and/or share revenues with it, the potential conflict of interest could hardly be clearer. X has struggled as a business since Musk’s acquisition, advertising revenues are under pressure and one of the co-investors, Fidelity, has written down the value of its stake significantly. Musk has indicated that X shareholders will own 25% of xAI, although it is unclear whether this will be individually or collectively through X. Either way, any infusion of cash or revenue potential from Tesla would be useful not just for xAI but for the wider X project.
Such a deal would also make a mockery of Tesla’s rationale for giving Musk a huge option package and then pressing to reinstate it after a Delaware court struck it down. Chairman Robin Denholm pushed shareholders to vote yes, in part by arguing that it would keep Musk’s roving eye focused on Tesla: “We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners,” he wrote. Musk then explicitly threatened to take his AI vision elsewhere if he didn’t get a bigger stake in Tesla (he had sold a portion during the Twitter acquisition).
If Tesla invests in or contracts with another Musk-controlled enterprise whose name is literally AI, that suggests at least some of his AI ideas went elsewhere, whether there was an option or not. Beyond the conflicts and regime-trolling, though, there is a more fundamental problem here.
Jonas, like similarly bullish analysts, attributes only a fraction of his Tesla valuation to manufacturing and selling EVs, even though it accounts for the bulk of the company’s revenue and profit. The only way to even remotely justify a market cap of nearly $700 billion is to believe that Tesla is not just an automaker, but an AI pioneer.
Yet if that is the case, if Tesla is going to “solve autonomy,” why would it consider outsourcing core AI tasks or feel the need to invest billions of dollars in a startup that launched just last year? Automakers do partner with other companies for some technologies. But Musk has been saying for years that Tesla is already on the verge of breaking vehicle autonomy on its own. Putting money or revenue into xAI undermines that narrative and will shift some of the promised value away from Tesla shareholders into Musk’s own ventures.
Perhaps these are just proposals and surveys that will remain just that. Still, there was another line in Jonas’ report that tells investors to prepare for the company’s new strategy “to more clearly connect Tesla with Elon’s other controlled enterprises such as SpaceX/Starlink, X, and XAI.” Autonomy means, after all, just doing what you want to do.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
