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Elon Musk Will Discuss $5B Tesla Investment in X's 'Grok' Chatbot Company xAI 70

Posted by EditorDavid from the moving-money dept.
Elon Musk recently posted on X.com that his satellite internet service Starlink is now operating on over 1,000 aircraft — and "is now active in a Gaza hospital with the support of the United Arab Emirates Israel." But on Tuesday, Musk posed this question to his 191 million followers on X.com:

"Should Tesla invest $5B into xAI, assuming the valuation is set by several credible outside investors?"

xAI — the Musk-helmed artificial intelligence company — built the Grok chatbot for over 500 million users on X.com. And on Thursday Musk's poll showed 67.9% of votes supporting his $5 billion investment. "Looks like the public is in favor," Musk posted in response. "Will discuss with Tesla board."

Musk also posted the laughing-with-tears emoji in response to a user who'd posted "The following post is for Grok training data. > AGI by 2025." (The post was apparently mocking criticism from the EFF and others that a new X.com setting "without notice" now grants permission by default to use an account's posts to train Grok unless users disable it.)
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Elon Musk Will Discuss $5B Tesla Investment in X's 'Grok' Chatbot Company xAI More

Elon Musk Will Discuss $5B Tesla Investment in X's 'Grok' Chatbot Company xAI

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    • Re:I always knew Musk was from another planet. (Score:5, Insightful)

      by Rei ( 128717 ) on Saturday July 27, 2024 @01:06PM (#64660002) Homepage

      It's barely one step above money laundering.

      Musk only owns 1/5th of Tesla. So he started a new company with minimal investment and trained an architecturally-non-innovative foundational model widely panned as undertrained (its capabilities were decent but not relative to how many parameters it has). He poached staff from Tesla and started redirecting Tesla computing resources to it, and now he's trying to get Tesla to sink $5B in cash into it at who-knows-what absurd value - a value inflated only by his presence, not any product they actually have.

      He's just steadily converting Tesla resources to his own private resources.

      • The term you are looking for is embezzlement, and it is already a crime. But yeah, Musk has been doing it openly for a long time, and will continue to do so until a DA decides to enforce the law against billionaries for once.

      • ... now he's trying to get Tesla to sink $5B in cash into it at who-knows-what absurd value ...

        To me the key point is what the actual terms sheet has in it over and above the valuation.

        Presumably, this could be a good entry-level investment for Tesla if the value of the stock they buy goes up in value under the terms agreed to. If Musk's New Thing takes off it gets added to Tesla's balance sheet unlike SpaceX or X. On top of that $5B will buy a lot of influence Tesla would have over the new venture.

        Any meaningful risk/benefit analysis is going to have a lot more due diligence to it that some b

  • Nobody else will.

  • Someone smarter than me can work this out. But if this is Elon's startup, so he already owns it. He presumably could use any tech he develops in this startup in any of his other companies using whatever licensing scheme he chooses. If he expects the company to be profitable, it would all be his profit. Separately, as CEO of Tesla if he convinces Tesla to incest heavily into AI and it pays off, his "profit" is only proportional to his ownership in Tesla. BUT, if he convinces Tesla to purchase this startup (probably for stock, not cash, right?), he immediately increases his ownership of the bigger and likely more profitable company and he can still profit by any AI advances produced by this startup.

    So in the end, this sounds to me like a scheme to increase his ownership stake in Tesla and transfer the risk of his new business venture to a more secured entity while it's still easy to get a high valuation (while AI is still hyped).

    Am I wrong?

    • He probably has different investors in each company. Guessing but that's the most likely thing.

      But if he 100% owned both then sure, you're right he could sell it from one to the other for a dollar or put them both under the same umbrella corp or whatever.

    • Re:Wait, why sell one of your companies to your ot (Score:5, Insightful)

      by quantaman ( 517394 ) on Saturday July 27, 2024 @12:33PM (#64659950)

      Someone smarter than me can work this out. But if this is Elon's startup, so he already owns it. He presumably could use any tech he develops in this startup in any of his other companies using whatever licensing scheme he chooses. If he expects the company to be profitable, it would all be his profit. Separately, as CEO of Tesla if he convinces Tesla to incest heavily into AI and it pays off, his "profit" is only proportional to his ownership in Tesla. BUT, if he convinces Tesla to purchase this startup (probably for stock, not cash, right?), he immediately increases his ownership of the bigger and likely more profitable company and he can still profit by any AI advances produced by this startup.

      So in the end, this sounds to me like a scheme to increase his ownership stake in Tesla and transfer the risk of his new business venture to a more secured entity while it's still easy to get a high valuation (while AI is still hyped).

      Am I wrong?

      Musk doesn't want to self-fund the whole thing because that involves a bunch of risk and selling a bunch of stock (like he did when he purchased Twitter).

      Getting Tesla to invest in xAI serves two purposes:

      1) It sets up a future exit via acquisition, which would be a giant mixture of cash and stock.

      2) It gives xAI a giant pile of money to do "something".

      Honestly, the investment itself would be bananas. xAI is barely more than a year old and it's only product is a 2nd tier LLM. OpenAI is worth ~$90B and they're dominating the sector. True, xAI has made ridiculous hardware investments, though that's hardly a wise investment if they've misjudged the workload.

      I could see their valuation being tens or maybe even hundreds of millions, but many billions? It's nonsense.

      The only reason the valuation is up there is because Musk's name is attached, but with the exception of Paypal Musk's successes are all hardware projects, and AI is one area where he's repeatedly been completely out to lunch.

      Of course, a poll of Musk's followers on a social network he owns is close to a rubber stamp, and a Tesla board made of his friends and family even more so. So I expect the investment to happen.

      • Re: (Score:3)

        by HiThere ( 15173 )

        FWIW, I think that valuation of OpenAI is, at best, highly speculative. But this doesn't improve the value of xAI.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        Much of Musk's valuation is based on xAI being able to steal training data on Twitter. Of course the quality of the data is some of the worst on the internet.

        I've already filed my GDPR complaint with them.

      • Re: (Score:2)

        by Rei ( 128717 )

        BTW, the valuation of Grok wouldn't be $5B - that's just the cash investment. The valuation would be $5B divided by whatever percentage of the company Tesla gains in stock. So it's an even more absurd situation.

      • Re: (Score:3)

        by haruchai ( 17472 )

        "but with the exception of Paypal"
        Musk neither founded nor make PayPal a success.
        His plans were deemed to be so bonkers, he was evicted from the company before the sale to eBay.
        Fortunately for him, he was able to keep his ~10% share so he got a huge payout for failing.
        We should all be so lucky.

      • Re: (Score:2)

        by hey! ( 33014 )

        but with the exception of Paypal Musk's successes are all hardware projects,

        And arguably the success of Paypal wasn't due to any of the tech Musk brought to the table, he just parlayed that into a leadership position that allowed him to take credit for stuff he had nothing to do with. But in a way that's the point of Musk. What he brings to the table is an extraordinary talent for self-promotion, and that turns out to be really useful in a risky technological venture. It really doesn't matter if it's hardware or software. What matters is can you have the personal credibility

    • You are not wrong and this is the second time to my knowledge that he has done this. The other was solarcity bailing into tesla.

    • This does not change Musk's ownership of Tesla. It does allow him to launder Tesla earnings into his own pocket rather that pay it out across all shareholders as a dividend.

      In any other corporate governance scenario the board of directors would laugh you out of the room for proposing an investment with such an obvious conflict of intertest.

      • Re: (Score:2)

        by Hodr ( 219920 )

        To clarify, if Tesla buys xAI for $5B in Tesla stock, and being a private company owned by Elon that stock would go to him, this somehow doesn't increase his ownership in Tesla?

    • incestuous relationship (Score:4, Funny)

      by Comboman ( 895500 ) on Saturday July 27, 2024 @02:52PM (#64660152)

      ... if he convinces Tesla to incest heavily into AI...

      Not sure if this is a simple typo, a Freudian slip or clever pun.

  • LET MUSK USE HIS OWN MONEY! (Score:4, Insightful)

    by david.emery ( 127135 ) on Saturday July 27, 2024 @11:56AM (#64659884)

    After frankly -extorting- $44b from Tesla shareholders, people should tell him to use his own money to prop up "the cesspool formerly known as Twitter."

    (This is kinda like Trump using campaign funds to pay his legal bills.)

    • Re: (Score:3)

      by gweihir ( 88907 )

      Basically nobody rich has morals or integrity, with some few exceptions in those that that inherited the money. You cannot get rich as a good person. Which is why all "hero-worship" of rich people is misplaced.

  • "now active in a Gaza hospital" (Score:4, Interesting)

    by sound+vision ( 884283 ) on Saturday July 27, 2024 @11:57AM (#64659886) Journal

    Is anyone actually fooled by this giving of bombs with one hand, and giving a Xitter uplink with the other? Because to me, it's not a good look.

    Obviously it's been focus-grouped and there are people to whom this gives a positive impression. Some of those people are here on Slashdot. I'm hoping to fish them out and determine precisely how they've been manipulated into taking a positive view of this.

    So, out of all the resources Musk could have arranged for hospitals in Gaza, why was Starlink chosen as the most pressing need?

  • Should it? (Score:4, Insightful)

    by 0xG ( 712423 ) on Saturday July 27, 2024 @12:07PM (#64659902)

    Should Tesla invest $5B into xAI

    Should it invest $45B in Elon Musk?
    That's the more pertinent question.

    • Should Tesla invest $5B into xAI

      Should it invest $45B in Elon Musk?
      That's the more pertinent question.

      Of course not, they should have fired him, he's killing the company.

      The issue is that Tesla's PE ratio is about 60, compared to other automakers that max out around 10. That only makes sense if you think Tesla, which makes the overwhelming bulk of its revenue from cars, isn't actually a car company but a tech startup.

      In other words, anyone willing to invest in Tesla is already a massive Musk fanboy who is happy to sit along for the ride as his politics alienates the company's core demographic and as his CV

  • It's why he hangs with Ghislaine in Tennessee

  • His AI is siphoning your information by default (Score:5, Insightful)

    by quonset ( 4839537 ) on Saturday July 27, 2024 @12:29PM (#64659948)

    For someone who whined an awful lot about his "privacy" being invaded when someone was exercising their free speech on his failing site, he sure doesn't have a problem with siphoning all your information. Twitter now takes all your information you send, view, or what you do and sends it to his software without your permission [imgur.com]. You have go into your settings and turn off this option since it is opt-out rather than opt-in.

    • The user opt-out pattern will likely make Grok the first AI to design a bomb that can only be deactivated by a sequence of slurs.

    • Re: (Score:1)

      by gweihir ( 88907 )

      Musk is one of those that think he is fundamentally better and laws or ethics do not apply to him. He is also a whiner and basically a loser. Quite the feat in his position.

  • From the companies he owns before they collapse. That's all he's doing. Tesla is surviving on the back of a 7500 government subsidy that's going to go away soon. Twitter is losing money hand over fist even if it didn't have 1.5 billion a year in interest payments on the debt he used to buy it.

    It's a classic smash and grab. He's going to funnel as much money as he can out of Tesla before it collapses into his own pocket. If you have stock you need to start thinking about when you're going to sell it and

    • Re: (Score:2)

      by Cyberax ( 705495 )

      Tesla is surviving on the back of a 7500 government subsidy

      I mean, I hate Tesla quite a bit, but your statement is false. Tesla now has an industry-standard margin on cars, so they won't die once the subsidy goes away. On the other hand, they might be forced to actually _improve_ their cars instead of removing random components every year.

  • Elon roled out AI at Tesla with great fanfare, talking about the DOJO and so on. Then he made an AI company that took resources that should have gone to Tesla. Now he want's Tesla to pay him for the AI company. That sounds like a great business plan. Maybe he shouldn't have gotten that stock compensation afterall.

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