Elon Musk Redirects AI Chips From Tesla To X And xAI, Sparking Investor Concerns

Elon Musk has confirmed that he diverted thousands of artificial intelligence (AI) chips initially intended for Tesla to his other ventures, X (formerly Twitter) and xAI Corp. This revelation has raised questions about Tesla’s AI initiatives and procurement practices, particularly in light of conflicting internal Nvidia emails and Musk’s public statements.

According to Musk, 12,000 Nvidia H100 graphics processing units were redirected from Tesla to X, a move first reported by CNBC based on a December Nvidia memo. Despite this, Musk asserted that Tesla did not have the necessary infrastructure to utilise the chips at the time. He further projected that Tesla would have around 85,000 H100 GPUs operational by the end of the year, with total AI expenditures expected to reach approximately USD 10 billion, half of which would be internal.

However, internal emails from Nvidia staff, viewed by CNBC, indicated discrepancies between Musk’s statements and Tesla’s actual bookings with the chipmaker. This has led to some uncertainty about Tesla’s AI strategy and its current technological capabilities.

The stock market responded swiftly to the news, with Tesla shares falling as much as 1.3 per cent following the report. This drop added to the company’s broader trend of declining stock performance, with shares down about 30 per cent for the year. Musk estimated that Tesla’s purchases from Nvidia could total between USD 3 billion and USD 4 billion this year.

In his efforts to advance Tesla’s AI capabilities, Musk has overseen major restructuring within the company, including significant layoffs. Tesla is heavily investing in AI to develop self-driving technology and is in the process of building its own supercomputer. Despite longstanding plans for an autonomous taxi service, the company still lacks the necessary infrastructure and regulatory approvals to fully implement such a service.

Musk’s maneuvering has also extended to his corporate control ambitions. He has demanded approximately 25 per cent voting control of Tesla, which has drawn increased scrutiny towards his AI plans. This demand comes after a Delaware court voided a compensation package that would have significantly increased Musk’s stake in Tesla. Shareholders will vote on this compensation package again at the annual meeting on 13 June.

(Inputs from CNBC and Bloomberg)