Elon Musk has been draining Tesla’s AI talent dry, shareholders allege in lawsuit

In it, the shareholders accuse Musk of diverting critical AI talent and resources away from Tesla and into his new AI-focused company, xAI.

They also allege that Tesla’s board hasn’t tried to stop him.

Representatives for Tesla did not immediately respond to BI’s request for comment.

The plaintiffs allege in the suit that Musk has recently touted Tesla as more of an AI company than simply an electric car company.

He has, for example, repeatedly said that building out AI capabilities is essential to Tesla’s future growth and success, doubling down on this commitment both to investors and in SEC filings, the lawsuit alleges.

During Tesla’s quarterly earnings in April, the company gave investors a sneak peek at its plans for a robotaxi fleet, sending the stock soaring despite posting weak financial data.

But, the plaintiffs argue that ever since he founded xAI in 2023, Musk has poached AI-focused employees from Tesla and into his new startup. At one point, in response to a suggestion that a major AI researcher should work for Tesla, Musk publicly commented that he should join xAI instead, the lawsuit states.

It’s not just AI talent that Musk is pilfering from Tesla — the shareholders also allege that Musk has redirected critical Nvidia GPUs from Tesla to xAI, despite previously stating that the car company would gobble up the hardware as fast as Nvidia could deliver it.

And Musk has flirted with focusing his AI efforts outside Tesla unless he gets a bigger stake in the company.

In January 2024, Musk posted on X, formerly Twitter, “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control . . . . Unless that is the case, I would prefer to build products outside of Tesla.” The shareholders referenced that post in their lawsuit.

As for Tesla’s board of directors, the shareholders allege they are just bowing down to Musk.

“Consistent with its long history of obsequiousness to Musk, the Tesla Board has utterly failed to even attempt to meet its unyielding fiduciary duty to protect the interests of Tesla and its stockholders in the face of Musk’s brazen disloyalty,” the suit alleges.

The shareholders demand in the suit that Musk and Tesla’s board answer for their “disloyalty” and return the value that Musk has pulled away from Tesla back to the company.

Quite a lot of company value has been lost from Tesla of late, though it’s unclear if that’s solely due to Musk’s alleged betrayal.

Tesla’s stock has dropped more than 25% so far this year; some critics have argued Musk is being distracted by other projects.

The sharp decline in Tesla stock this year has even affected Musk’s proposed pay package, dropping it from an estimated $55 billion down to $45 billion.