Tesla shareholders have taken legal action against CEO Elon Musk and the company’s board, alleging that Musk’s xAI startup is a direct competitor that is siphoning off artificial intelligence talent and resources from Tesla. This lawsuit comes on the same day that shareholders voted to reinstate Musk’s $44.9 billion pay package that was previously rejected by a Delaware judge in January.
The lawsuit, filed on June 13 in Delaware’s Chancery Court by the Cleveland Bakers and Teamsters Pension Fund, Daniel Hazen, and Michael Giampietro on behalf of Tesla, claims that Musk has been diverting valuable resources from Tesla to xAI and has raised billions for the startup while boasting about xAI’s access to Tesla’s AI-related data. Musk’s xAI has also poached key AI-focused employees from Tesla, including Ethan Knight, Tesla’s computer vision team lead.
According to the lawsuit, Musk personally directed Nvidia to redirect graphics processing units (GPUs) intended for Tesla to xAI and X, claiming that the GPUs would have otherwise gone unused. The shareholders also criticize Tesla’s board for failing to intervene and uphold their fiduciary duty in the face of Musk’s actions, allowing him to create significant AI-related value for a company other than Tesla.
The lawsuit seeks the return of the value that has been diverted from Tesla as a result of Musk’s actions. Tesla’s shares have dropped by 26.5% this year, closing at $182.47 on June 13 with a slight increase in after-hours trading, according to Google Finance.
The legal action by shareholders is partly linked to Musk’s own statements in a January post where he expressed discomfort with expanding Tesla’s AI and robotics efforts without having significant voting control. Musk’s ownership in the company dropped from around 21% to 13% following the court’s decision to rescind his 2018 compensation plan in January, prompting him to increase operations at xAI.
The shareholders’ vote to reinstate Musk’s pay package is likely to face further legal challenges in Delaware’s Chancery and Supreme Courts as Tesla seeks to overturn the initial rejection. Tesla has not yet responded to requests for comment on the matter.