Zhi Dongxi reported on August 14 that, according to foreign media, since the establishment of xAI in 2023, billionaire Elon Musk has set a grand plan for his artificial intelligence startup, xAI. The core of the plan is to allocate resources from other companies under his control to serve xAI. Musk plans to use talent, data, and hardware provided by Tesla and X (formerly Twitter) to achieve his goal of building the world's most powerful AI by December this year.

However, this move has sparked dissatisfaction among Tesla shareholders. They believe that this action has harmed Tesla's interests and filed a lawsuit in June this year, demanding that the court transfer Musk's equity in xAI to Tesla and place Musk's interests in xAI under a trust.

I. Musk "Pries" Tesla Employees and Rents X Chips to Support xAI

According to information on the xAI official website and LinkedIn, xAI has recruited at least 11 employees who have worked at Tesla, including 6 who have worked directly on Tesla's autonomous driving team.

Musk once posted on the X platform that xAI, Tesla, and X are actively recruiting talents, and mentioned that he recruited employees for xAI from other companies under his control, with the purpose of preventing excellent engineers from jumping to competitors.

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In July this year, Musk initiated a poll on the X platform, asking users whether they support Tesla's investment of $5 billion in xAI, and explained that this move still needs to be approved by the board of directors and shareholders. The results showed that 68% of the voters supported this proposal. Musk then said, "Since the public supports this idea, I will discuss this matter with the Tesla board."

According to a report by CNBC, Musk requested that the Nvidia chips originally reserved for Tesla be transferred to xAI and X, explaining, "Tesla currently has no place to install and use these chips, they will only be idle in the warehouse." CNBC cited an internal email from Nvidia, saying that the same number of chips will be transferred back to Tesla from xAI and X in the future to achieve resource exchange.

xAI is also closely connected with Musk's other social media platform, X. Informed sources revealed that xAI has rented important computer chips: graphics processing units (GPUs) from X under Musk's control, and may have access to real-time data from the X platform. Last fall, Musk also revealed that X's shareholders will own 25% of xAI's shares.

Informed sources revealed that X has provided xAI with $250 million in computing power. In return, xAI's Grok chatbot is also only available on the X platform through a subscription, and xAI's engineers are also responsible for fixing problems on X and will use xAI's models to improve X's functions.The practice of resource allocation between Musk's companies is not the first of its kind. Over the years, Musk has continuously allocated resources between his companies, such as the rocket startup SpaceX, the brain-computer interface company Neuralink, and the social media platform X, to support the development and technological innovation of each company.

II. Shareholders Dissatisfied with Resource Allocation, Lawsuit Demanding Transfer of xAI Shares to Tesla

Despite Musk's claim that resource allocation will bring overall benefits to the major companies he leads, Tesla shareholders do not fully agree with this view. Tesla's autonomous driving team focuses on AI-driven autonomous driving technology, which Musk has mentioned is crucial for Tesla's future. However, now, six core members of the team have switched to join xAI. Musk has also publicly mentioned: "The vast amount of visual data collected by Tesla will help train the xAI model."

Tesla investors have accused Musk of tilting Tesla's core resources and talents towards his newly established artificial intelligence company xAI, believing that this violates Musk's fiduciary duty to Tesla and may harm Tesla's interests.

Tesla shareholders have now filed a lawsuit, demanding the court to stop Musk from continuing such behavior and seeking to transfer his shares in xAI to the name of Tesla.

This lawsuit specifically targets the redistribution of GPU resources between Tesla and xAI. The complaint clearly states: "Musk is creating tremendous value through xAI, which may reach tens of billions of dollars in the near future, but all at the expense of Tesla's interests."

III. xAI Secures $6 Billion in Financing, Becomes Tesla's AI Competitor

Since its establishment in 2023, xAI has released a chatbot named Grok and has begun building the "world's largest data center" envisioned by Musk. In this process, xAI has successfully raised $6 billion in financing in the past few months, thanks to its close ties with Musk's companies. xAI's current valuation has reached $24 billion, making it the second-largest AI startup in the world after OpenAI.

Some investors believe that the connection between xAI and other companies under Musk is one of the important reasons for their investment in xAI. These investors are looking forward to the potential of xAI to use resources from other companies under Musk, including Tesla's data, to train its large language models. However, Musk clarified in an interview with Canadian psychologist Jordan Peterson that xAI has not yet applied Tesla's real-world video data to its large language models.xAI and Tesla each have their own goals in the field of artificial intelligence, which leads to potential conflicts in resource allocation between the two companies. Tesla is not only focused on the sale of electric vehicles but also committed to the development of fully autonomous driving systems and humanoid robots, which may compete with the AI research directions of xAI.

Despite much speculation from the outside world, Tesla has not made any public response. In the financial report conference call last month, Musk mentioned: "Tesla has learned a lot from xAI, which is very helpful in promoting fully autonomous driving and establishing a new Tesla data center."

Resource allocation between companies is legal but risky, and Tesla shareholders are worried about being "harvested." Resource allocation between enterprises is not illegal in itself, but the premise is that each entity company has received reasonable compensation. However, this arrangement is extremely rare and full of risks in large companies. Because this kind of resource allocation makes people worry that the CEO may damage the interests of one company for the benefit of another company.

Tesla is the only listed company under Musk. At least three Tesla shareholders have filed lawsuits, claiming that Musk has transferred scarce talents and resources from Tesla to his startup xAI, which has harmed the interests of Tesla investors. These cases are currently being tried in the Delaware court. Boston College law professor Brian Quinn commented: "Every time Musk uses the resources of these companies, he is actually using other people's money. He cannot regard these assets as his personal property."

When the CEO serves as both the buyer and the seller in the same transaction, negotiation and price determination may involve insider trading. The public is worried that a CEO with conflicts of interest may intentionally introduce new businesses to companies in difficulty or pay too low a price when trading with more successful companies. UCLA law professor Scott Cummings pointed out: "The law does not prohibit individuals from bearing fiduciary responsibilities to multiple companies, but it prohibits actions that intentionally harm one company to benefit another."

Corporate governance experts point out that although Musk may have more freedom in dealing with unlisted companies than in Tesla, he still needs to be responsible to the investors of these companies, including xAI investors. The difference is that investors of xAI or other unlisted companies may not be able to take legal action against him easily. In this regard, Professor Quinn from Boston College pointed out: "In an unlisted company, there may only be 10 shareholders, and everyone knows each other. In this case, the problem is likely to be resolved with a phone call."

However, as Musk's only listed company, Tesla faces more significant risks because the billionaire does not hold a majority stake in Tesla. But when resources are tilted towards Musk's other unlisted companies, Tesla shareholders may feel that their interests are infringed upon and are more likely to challenge Musk's decisions through legal means.

Conclusion: Musk is sued for resource allocation, and the risk of conflicts of interest remains to be resolved.

The resource allocation between Tesla and xAI has triggered legal lawsuits from shareholders, and Musk is accused of potentially damaging the interests of Tesla. Although resource allocation has potential benefits, there are risks of conflicts of interest in actual operations. At present, this lawsuit is still under trial, and Musk, Tesla, xAI, and X have not yet responded.