Tesla shareholders sue Elon Musk for diverting resources to his AI company

Tesla shareholders sue Elon Musk for diverting resources to his AI company

Tesla shareholders have filed a lawsuit against CEO Elon Musk and the company’s board for allegedly shifting resources and talent away from the electric carmaker and using it instead for Musk’s artificial intelligence (AI) company, xAI.

Several shareholders claimed Musk had for years tried to position Tesla as a robotics and AI company rather than an automaker.

The plaintiffs said, in the lawsuit filed in the US state of Delaware, that Musk was "diverting scarce talent and resources from Tesla to xAI, and raised billions of dollars for xAI while touting xAI’s access to Tesla's AI-related data".

They also allege that Musk ordered thousands of Nvidia-made AI chips destined for Tesla to be diverted to his social media company X and accused the Tesla board of not preventing Musk "to plunder resources from Tesla and divert them to xAI; and to create billions in AI-related value at a company other than Tesla".

The lawsuit, originally reported by TechCrunch and Business Insider, comes just after Musk dropped his own lawsuit against OpenAI, the company behind ChatGPT of which he was an original investor.

Musk launched xAI in March 2023 as a rival to OpenAI which would try to understand the "the true nature of the universe".

He later rolled out Grok the "maximum truth-seeking AI," which is currently available on his social media platform X for premium subscribers.

Last week, xAI raised $6 billion (€5.6 billion), which the company said it will use to bring its first products to market.

The lawsuit comes as Tesla shareholders voted in favour of reinstating Musk’s $56 billion (€52.3 billion) pay plan on Thursday, which follows a decision by a judge in Delaware to rescind the package as it was judged improperly granted by the Tesla board.