Elon’s xAI vs. Tesla Tension: Shareholders Revolt Over Musk’s Dual AI Gambit

Elon Musk's AI empire faces investor mutiny as Tesla shareholders demand clarity—or cash—from his rival xAI venture.

Who's minding the store? While Musk juggles competing AI projects, Tesla's board grapples with restless investors wondering if their shares are funding the competition. The irony? Tesla's market cap now trails xAI's projected valuation—poetic justice for a company that taught Wall Street to price dreams over deliverables.

Behind the scenes: Shareholder proposals reveal growing impatience with Musk's divided attention. xAI's latest funding round reportedly dwarfs Tesla's R&D budget, sparking whispers about resource cannibalization. Meanwhile, Tesla's AI team sweats to deliver FSD v13 while their CEO tweets memes about AGI timelines.

The bottom line: When your star CEO treats public companies like venture capital piggy banks, even true believers start auditing the exits. Welcome to the Musk economy—where tomorrow's promises always eclipse today's P&L statements.

TLDRs;

• Shareholders raise concerns over Tesla investing in Elon Musk’s AI startup xAI.
• A vote is set for November 6 to determine Tesla’s involvement with xAI.
• Grok chatbot controversies and Pentagon contracts heighten scrutiny of xAI.
• Tesla stock down 22% as Musk’s political visibility and AI ventures shake confidence.

Tesla is facing growing pressure from shareholders over CEO Elon Musk’s AI company, xAI, as multiple investment-related proposals flood in ahead of the automaker’s annual shareholder meeting scheduled for November 6, 2025.

The proposals are focused on Tesla’s potential financial involvement with xAI, a startup Musk also leads.

Despite Musk ruling out a formal merger between the two entities earlier in July, he left the door open for a Tesla investment in xAI, promising to let shareholders decide. According to Tesla’s latest earnings call, Musk reaffirmed that “shareholders are welcome to put forward any shareholder proposals they’d like.”

The proposals come in just days before the July 31 deadline for proxy submissions, in line with U.S. SEC rules that allow only one proposal per topic in the final shareholder ballot.

🚨BREAKING: Tesla shareholders will vote on a potential Tesla investment into xAI

The vote will take place during Tesla’s annual shareholder meeting on November 6th.

Big moment coming, will retail say yes to the AI future? pic.twitter.com/aWoWRxS95z

— Muskonomy (@muskonomy) July 25, 2025

Grok Controversy Raise Eyebrows

Fueling the tension is xAI’s increasingly controversial public profile. The company was recently awarded a Pentagon contract as part of a broader effort to engage AI firms in addressing national security challenges. xAI joins major players like OpenAI, Google, and Anthropic, despite its relatively short track record.

The timing of the Pentagon deal has raised red flags. It came shortly after Grok, xAI’s chatbot, went viral for antisemitic and violent responses, including referring to itself as “MechaHitler.”

Despite public backlash, the Department of Defense did not remove xAI from contract consideration, triggering political backlash from Senate Minority Leader Chuck Schumer.

“This deal with xAI is wrong and dangerous,” he stated on the Senate floor, demanding transparency over how the startup secured government backing.

xAI Tightens Ties Across Musk’s Empire

xAI’s entanglement with Tesla isn’t limited to potential investment. In March, xAI acquired social media platform X for $33 billion, citing the need for better training data. Since then, Tesla vehicles have started shipping with Grok built into their software, further blurring the lines between Musk’s ventures.

This strategy of cross-integration has unsettled Tesla shareholders, many of whom question whether corporate resources are being used in Tesla’s best interest. Analysts argue that the company’s future could be compromised by overlapping leadership and conflicting interests.

Tesla Stock Dips on Musk Concerns

Tesla’s stock has slumped by 22% year-to-date, and many investors attribute the decline to broader concerns over Musk’s political involvement and divided focus. Now, the proposed xAI investment has emerged as a litmus test for shareholder confidence in Tesla’s leadership.

While Musk remains adamant about shareholder inclusion, the growing scrutiny highlights a shift in sentiment. Once lauded for bold innovation, Musk’s intertwining of personal ventures now threatens to become a liability for Tesla, especially as the automaker navigates a competitive EV market and uncertain economic landscape.

That said, the outcome of November’s vote could signal whether Tesla investors are still willing to follow Musk’s multi-company vision, or ready to set clearer boundaries between ambition and accountability