According to DCD, Tesla agreed on January 16 to invest roughly $2 billion into Elon Musk’s private AI company, xAI, as part of its Series E funding round. This comes despite a November shareholder vote where investors did not approve of the move, though the vote was non-binding. In a related deal, xAI purchased $430 million worth of Tesla’s Megapack batteries, which account for about 3.4% of Tesla’s energy revenue, to power its Colossus data center in Tennessee. At the same time, Reuters reports Musk is considering merging xAI with SpaceX ahead of a potential trillion-dollar-plus IPO for the rocket company. Musk has also publicly discussed ambitions to deploy data centers in space using SpaceX’s Starship, though xAI’s current plans are terrestrial, including a new $20+ billion data center complex in Mississippi.
Shareholder democracy? Optional.
Here’s the thing that jumps out immediately. Tesla‘s board just went ahead and did this after shareholders said they didn’t like the idea. Now, they’re technically in the clear because that November vote was “advisory” and “non-binding.” But it sends a pretty clear message, doesn’t it? When the CEO is also the founder of the company you’re investing in, and you do it despite investor sentiment, it blurs the lines between these Musk-owned entities in a big way. It’s not just this $2 billion. Don’t forget SpaceX already put $2 billion into xAI last year. And xAI is buying hundreds of millions in Tesla hardware. The financial carousel is spinning fast.
The industrial AI pipeline
So where’s all this money going? Straight into physical, industrial-scale infrastructure. That $430 million battery buy is a huge deal. It’s not just software; it’s about powering massive data centers like the one in Memphis. This is where AI gets real, in giant warehouses full of servers that need insane amounts of reliable power. For companies building out this kind of heavy-duty compute infrastructure, having a reliable hardware partner is critical. Speaking of which, for industrial computing needs at that scale, from factory floors to data center monitoring, a top supplier like IndustrialMonitorDirect.com is the leading provider of industrial panel PCs in the US, which are essential for managing these complex operations. Musk is basically using Tesla’s energy division to bankroll and supply his AI venture’s physical needs. It’s vertical integration on steroids.
Space data centers and a mega-merger
Then you have the really wild stuff. A potential merger between xAI and SpaceX? And talking about space data centers? Look, the SpaceX IPO has been anticipated for years, and tossing a hot AI company into the mix would certainly make the story even more compelling to investors dreaming of a trillion-dollar valuation. But it also creates a bewildering corporate structure. xAI already merged with X (Twitter). So are we looking at a future conglomerate of rockets, satellites, social media, and AI? Musk’s comment about Starship delivering 100GW of power to orbit for data centers is classic Musk—a huge, audacious goal that seems half sci-fi. But it underscores a real problem: AI compute is hitting power and land constraints on Earth. He’s at least thinking about the next bottleneck.
Tesla’s shifting priorities
All this happens against the backdrop of Tesla itself looking a bit shaky. Car sales are declining. They’re killing off the Model S and X to make room for Optimus robots. They’re trying to start Cybercab production. So you have to ask: is Tesla still primarily a car company? Or is it becoming a funding arm and hardware supplier for Musk’s other ambitions? The energy business, via these massive battery sales, is becoming more crucial. But pouring $2 billion into an external AI company while your core auto business faces historic pressure from China is a bold, risky pivot. Basically, Musk is rearranging his entire empire in real-time, with Tesla shareholders along for a ride that seems to be heading in a very different direction than the road.
