Reports have surfaced suggesting that Elon Musk’s artificial intelligence startup, xAI, is contemplating a technology-sharing agreement with Tesla. Under this proposed deal, xAI would develop and license advanced autonomous driving (FSD), voice assistant, and robotics technologies to Tesla in exchange for licensing fees. While such an arrangement could bolster xAI’s AI expertise, it has raised concerns about potential favoritism given Tesla’s publicly traded status.
On Sunday, The Wall Street Journal (WSJ) reported that xAI is in discussions to receive a share of Tesla’s profits in exchange for providing technology and resources. The negotiations include a potential deal where Tesla would license xAI’s AI models, equally splitting Tesla’s Full Self-Driving (FSD) revenue. Tesla currently sells its FSD software to vehicle buyers for $99 per month or a one-time payment of $8,000.
Musk immediately denied the WSJ report. He wrote on X (formerly Twitter), “Tesla has learned a lot from discussions with engineers at xAI that have helped accelerate achieving unsupervised FSD, but there is no need to license anything from xAI,” and accused WSJ of making false claims. However, it is evident that AI resources initially invested in Tesla are now being redirected to xAI. Reports indicate that several AI researchers from Tesla have joined xAI, and thousands of AI accelerators ordered from Nvidia last year are also moving to xAI. Although Musk initially denied the transfer of these accelerators, he later admitted it, casting doubt on the validity of his denial regarding the proposed licensing deal.
The issue lies in the differing shareholder structures of Tesla and xAI. While Tesla is a publicly traded company, xAI is privately held. xAI has received $6 billion in investments from Sequoia Capital, Andreessen Horowitz (a16z), Valor Equity Partners, Saudi Prince Alwaleed bin Talal, and Kingdom Holding. Still, there is no significant equity relationship with Tesla. If the licensing deal goes through, it would effectively mean Tesla, a public company, transferring AI development capabilities to Musk’s private company, xAI, and paying fees for their use, sparking concerns of favoritism.
The WSJ highlighted concerns regarding Tesla’s resource-sharing arrangement, indicating potential conflicts of interest with the publicly traded company. The report noted that Tesla shareholders have already filed lawsuits claiming that the resource allocation to xAI negatively impacted their investments. The article suggested that an official licensing deal could further solidify asset-sharing practices across Musk’s ventures.
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