Some Tesla shareholders say diverting Nvidia chips is further proof that Elon Musk doesn’t deserve a multibillion-dollar pay package

This package, now roughly worth $46 billion, was struck down in January by Delaware Chancery Court Chancellor Kathaleen McCormick, who said that the process to reach this “unfair price” for Musk was “deeply flawed.”

Tesla shareholders will vote on June 13 on whether to reinstate Musk’s deal.

But less than two weeks ahead of the shareholder vote, CNBC reported that Musk diverted a $500 million shipment of Nvidia chips, which are essential for powering artificial intelligence technology, away from Tesla and to his social media platform X instead.

The internal memo from Nvidia indicating Musk’s delay of the Nvidia chips procurement was from December, CNBC reported — months before the April earnings call in which the Tesla CEO insisted the automaker is an AI company. He also stated in the call that he would aggressively expand the number of Nvidia chips at Tesla from 35,000 to 85,000 units by the end of 2024.

In response to the CNBC report, Musk said on X that “Tesla had no place to send the Nvidia chips to turn them on, so they would have just sat in a warehouse.”

“The south extension of Giga Texas is almost complete. This will house 50k H100s (Nvidia chips) for FSD training,” Musk added, referring to Tesla’s Full Self-Driving feature — a key component of the company’s promise to deliver autonomous taxis.

But some of the shareholders behind the effort to strike down Musk’s big payday are not convinced.

“The diversion of Nvidia’s processors to X and xAI is just another example of Tesla’s CEO reallocating Tesla’s resources in favor of his other businesses and treating Tesla as though it is his own coffer as a result of the lack of oversight by Tesla’s board,” Tejal Patel, the executive director of SOC Investment Group, wrote in an email to BI.

Patel added: “The key questions are why were these valuable processors ‘just sitting there’ in the first place, and if it was an operational issue, why was that not foreseen by management? Whatever decision-making there was for the processors to go unused by Tesla would have been up to CEO Musk.”

Musk did not respond to a request for comment from Business Insider.

SOC Investment Group is one of the eight shareholders that co-signed a letter urging investors to vote against the ratification of Musk’s stock options package and against the reelection of Musk’s brother, Kimbal, and James Murdoch for seats on Tesla’s board.

The group — made up of pension fund managers, an asset management firm, and a bank — also includes Amalgamated Bank, AkademikerPension, Nordea Asset Management, New York City Comptroller Brad Lander, SHARE, Unison, and United Church Funds.

In a statement to BI, Lander wrote that Musk’s decision to divert Nvidia chips away from Tesla “should be a “red flag to investors.”

“This sudden move adds to the growing concerns about Musk’s commitment to Tesla and highlights his glaring conflicts of interest,” he wrote. “There is a pressing need at Tesla for a genuinely independent board that will ensure Musk prioritizes company interests.”

Matthew Illian, the director of responsible investing for United Church Funds, similarly criticized Musk’s move to delay the shipment of Nvidia chips, stating that it was “further evidence” that the pay package “never achieved its purpose of maintaining the attention of Tesla’s CEO.”

“This is all about Elon building an empire for himself with investor money and we can’t let this happen,” he wrote in an email to BI.

It’s not immediately clear how much Tesla stock the eight shareholders own altogether.

Five of the eight shareholders, including Amalgamated Bank, Unison, Nordea, the New York City Retirement System, and United Church Funds, represent more than 4.9 million shares of Tesla stock.

As of Thursday, those shares are worth more than $878 million.

Spokespersons for SHARE, Nordea, and Unison could not be reached for comment or did not immediately respond for comment.

In addition to the eight shareholders, the California Public Employees’ Retirement System (CalPERS), which owns about 9.5 million shares of Tesla stock, signaled it would vote against Musk’s pay package.

“We do not believe that the compensation is commensurate with the performance of the company,” CalPERS CEO Marcie Frost told CNBC.

A CalPERS spokesperson declined to comment when asked about Musk’s decision to divert the shipment of Nvidia chips.