Tesla shareholders are divided on whether to invest in Musk’s xAI. Although there were more votes in favor than against, a large number of abstentions were counted as against, resulting in the proposal not being passed. Although the proposal is not legally binding, the board of directors stated that they will consider supporting it. The two companies already have business cooperation, but there is still uncertainty about future integration.
Tesla shareholders have cast a complex vote on the proposal for the electric vehicle manufacturer to invest in Musk’s artificial intelligence startup xAI. Although the number of votes in favor exceeded the number of votes against, due to a large number of abstentions being counted as opposition, this non binding proposal ultimately failed to pass, casting a shadow over Tesla’s prospects for investing in xAI.
According to regulatory documents submitted by Tesla last Friday, the shareholder proposal authorizing the board of directors to invest in xAI received 1.06 billion votes in support and over 916.3 million votes against. But over 473 million votes were abstained – more than twice the number of abstentions for any other proposal at this year’s shareholders’ meeting.
According to Tesla’s bylaws, abstentions are considered as negative votes, therefore the proposal was not passed. Tesla’s General Counsel Brandon Ehrhart stated at the annual shareholder meeting on Thursday that, given the level of shareholder support, the board will consider the next steps.
Musk previously publicly supported Tesla’s investment and proposed the idea of injecting $5 billion last year. The two companies already have business connections: in 2024, xAI spent nearly $200 million on Tesla Megapack batteries, and Tesla has also integrated xAI’s chatbot Grok into its vehicles.
A proposal that “failed” due to rules
The core of this voting result lies in a technical detail: the handling of abstentions. Although the number of shareholders who directly voted in favor exceeded the number of opponents, as many as 473 million abstentions were counted as negative votes according to the company’s articles of association, ultimately resulting in the proposal not being approved.
This result highlights the hesitant attitude of some shareholders towards further deepening Tesla’s ties with Musk’s other companies. Due to the advisory nature of the proposal, its outcome is not legally binding on the board of directors. But Brandon Ehrhart’s statement implies that the board has taken note of the strong voices supporting the proposal and will consider them in subsequent decisions.
While shareholders are engaged in a game over whether to invest, Tesla and xAI have already established preliminary business connections. In 2024, xAI spent nearly $200 million on Tesla’s Megapack energy storage battery. In addition, Tesla has integrated xAI’s chatbot Grok into its vehicle system.
Tesla also pointed out the duality of this relationship in its power of attorney statement. On the one hand, the company acknowledges that the “new innovation process” pioneered by Musk in other companies, including xAI, may not fully align with Tesla’s mission and therefore should not be built using Tesla’s resources. On the other hand, the statement also pointed out that Musk’s exploration in the field of artificial intelligence “may drive further development of automated decision-making and real-world adaptability, which could benefit Tesla’s cars and robotics products
The cautious stance of the board of directors
In contrast to Musk’s positive attitude, Tesla’s board of directors has taken a neutral and cautious stance on this investment proposal. The board of directors did not make any recommendations for or against the proposal.
Board Chairman Robyn Denholm expressed reservations about the integration prospects of the two companies in an interview last week. She said:
What xAI is doing and what Tesla is doing are fundamentally different in the field of artificial intelligence. ”
Denholm describes xAI’s work as “very grand and comprehensive,” while Tesla focuses on specific real-world applications in the energy and transportation sectors.
XAI and Musk’s Business Empire
Approval of this investment will further intertwine Musk’s vast business landscape. SpaceX is already one of the investors in xAI, and earlier this year, Musk merged xAI with his social networking company X. Currently, xAI trains its model using posts on the X platform and distributes its Grok chatbot through this social network, formerly known as Twitter.
Over the past year, Musk has been actively raising funds for xAI to support its infrastructure construction, including data centers and expensive training chips. According to reports, the company is raising $20 billion through debt and equity from various investors, including Nvidia, to fund the technology needed for its data center in Memphis. The result of this shareholder vote undoubtedly adds new variables to xAI’s financing story and Musk’s empire integration plan.
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