The Tesla shareholder meeting failed to approve the investment in xAI. Is there still hope for the anticipated integration?
Tesla shareholders have expressed differing opinions on whether to invest in xAI, a company owned by Musk. Although there were more votes in favor than against, a significant number of abstentions were counted as opposition, resulting in the proposal not being approved. While the proposal is not legally binding, the board has stated that it will consider the support expressed. The two companies already have business collaborations, but future integration remains uncertain
Tesla shareholders cast a complicated vote regarding the proposal to invest in Elon Musk's artificial intelligence startup xAI. Although the number of supporting votes exceeded the opposing votes, the proposal ultimately failed due to a large number of abstentions being counted as opposition, casting a shadow over Tesla's prospects of investing in xAI.
According to regulatory documents submitted by Tesla last Friday, the shareholder proposal authorizing the board to invest in xAI received 1.06 billion votes in support, surpassing 916.3 million opposing votes. However, more than 473 million votes were abstained—more than double the number of abstentions for any other proposal at this year's shareholder meeting.
Under Tesla's bylaws, abstentions are considered as votes against, thus the proposal did not pass. Tesla's General Counsel Brandon Ehrhart stated at Thursday's annual shareholder meeting that, given the level of shareholder support, the board would consider the next steps.
Musk had previously publicly supported Tesla making this investment and proposed a $5 billion injection last year. The two companies already have business ties: in 2024, xAI spent nearly $200 million on Tesla's Megapack batteries, and Tesla has integrated xAI's chatbot Grok into its vehicles.
A Proposal That "Failed" Due to Rules
The crux of the voting result lies in a technical detail: the handling of abstentions. Although the number of shareholders voting in favor directly exceeded those against, the 473 million shares of abstentions were counted as votes against according to the company's bylaws, ultimately leading to the proposal's failure to gain approval.
This outcome highlights some shareholders' hesitance to deepen Tesla's ties with Musk's other ventures. Since the proposal was advisory in nature, its result does not have legal binding on the board. However, Brandon Ehrhart's statement suggests that the board has taken note of the strong support for the proposal and will consider it in future decisions.
While shareholders are engaged in a game of strategy 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 batteries. Additionally, Tesla has integrated xAI's chatbot Grok into its vehicle systems.
Tesla also pointed out the dual nature of this relationship in its proxy statement. On one hand, the company acknowledges that Musk's "new innovation processes" in his other ventures, including xAI, may "not fully align with Tesla's mission and therefore should not use Tesla's resources to build." On the other hand, the statement also notes 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 automotive and robotics products."
The Board's Cautious Position
In contrast to Musk's proactive attitude, Tesla's board has taken a neutral and cautious stance on the investment proposal. The board did not offer a recommendation for or against the proposal.
Board Chair Robyn Denholm expressed reservations about the integration prospects of the two companies during an interview last week. She stated:
"What xAI is doing is fundamentally different from what Tesla is doing in the field of artificial intelligence."
Denholm described 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
The approval of this investment will further intertwine Musk's vast business landscape. His SpaceX is already one of xAI's investors, and earlier this year, Musk merged xAI with his social networking company X. Currently, xAI uses posts on the X platform to train its models 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 infrastructure such as its data centers and expensive training chips. Reports indicate that 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 results of this shareholder vote undoubtedly add new variables to xAI's financing story and Musk's empire integration plans
