Tesla investors sue Elon Musk for diverting resources, talent to xAI

Jesse Coghlan4 hours agoTesla investors sue Elon Musk for diverting resources, talent to xAIShareholders accused Tesla boss Elon Musk of “brazen disloyalty” with his xAI startup that created “billions in AI-related value at a company other than Tesla.”1073 Total views20 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksTesla shareholders sued CEO Elon Musk and the vehicle maker’s board on Thursday, claiming Musk’s xAI startup is a “competing company” taking artificial intelligence talent and resources from the firm.

It comes the same day shareholders voted to restore Musk’s $44.9 billion pay package that a Delaware judge threw out in January.

Cleveland Bakers and Teamsters Pension Fund, Daniel Hazen and Michael Giampietro filed the June 13 stockholder complaint in Delaware’s Chancery Court on behalf of Tesla.

They claim Musk diverted “scarce talent and resources from Tesla to xAI” and raised billions for the startup while “touting xAI’s access to Tesla’s AI-related data.”

The vehicle maker has long touted the AI-backed self-driving abilities of its cars and driver assistance features.

Musk’s xAI hired “numerous key AI-focused employees from Tesla,” including its “most significant” hire of Tesla’s computer vision team lead, Ethan Knight, in March 2024, the trio said.

Citing an early June CNBC report, the lawsuit said Musk “began personally directing Nvidia” to send graphics processing units (GPUs) — the backbone compute power of AI models — bound for Tesla to xAI and X.

At the time, Musk claimed on X that the GPUs “would have just sat in a warehouse” as Tesla had “no place to send them.”

“Through all of this, Musk’s fellow directors on the Tesla board of directors have done nothing,” the shareholders said.

They added the board “utterly failed to even attempt” to meet its fiduciary duty to Tesla and its stockholders “in the face of Musk’s brazen disloyalty,” allowing him to “create billions in AI-related value at a company other than Tesla.”

The lawsuit asks for the return of “value that has been diverted from Tesla.”

Tesla Inc (TSLA) shares have fallen 26.5% this year. It closed June 13 up nearly 3% at $182.47 with a slight 0.13% bump in after-hours trading, according to Google Finance.xAI started over Musk’s lacking Tesla voting control, say investors

The trio pointed to Musk’s January X post where he said he was uncomfortable with growing Tesla’s AI and robotics efforts without having around 25% voting control.

“Unless that is the case, I would prefer to build products outside of Tesla,” Musk added.

Related:Elon Musk drops lawsuit against OpenAI CEO Sam Altman

The shareholders claimed Musk’s comment suggested he “consciously founded xAI to build outside of Tesla AI-related products that he previously intended to build inside of Tesla.”Source:Elon Musk

At the time of the post, Musk owned around 21% of the company, but Delaware’s Chancery Court rescinded Musk’s 2018 compensation plan in January, which saw his ownership drop to 13%, the lawsuit said.

With his voting power damped, “Musk responded by ramping up operations at xAI,” they claimed.

The shareholders’ June 13 vote to reinstate the 2018 pay pack still faces a likely months-long tie-up in Delaware’s Chancery and Supreme Courts as Tesla fights to overturn the earlier rejection.

Tesla did not immediately respond to a request for comment.

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