Tesla Inc (NASDAQ:TSLA) disclosed in its fourth-quarter earnings report that it has invested about $2 billion in xAI, the artificial intelligence startup founded by CEO Elon Musk.
The automaker said it entered into an agreement on January 16 to acquire shares of Series E preferred stock in xAI as part of the company’s latest financing round.
“Tesla’s investment was made on market terms consistent with those previously agreed to by other investors in the financing round,” Tesla said in its shareholder update.
Earlier this month, xAI said it raised $20 billion in its Series E round, valuing the company at around $230 billion. Tesla’s investment represents roughly 10% of the funds raised in that round, but less than 1% of xAI’s total valuation.
Other investors in the financing included Nvidia, Cisco, Fidelity and Qatar’s sovereign wealth fund.
Tesla said the investment aligns with its long-term strategy under “Master Plan Part IV,” which aims to integrate artificial intelligence into physical products and services. The company said xAI is developing “leading digital AI products and services, such as its large language model (Grok),” while Tesla focuses on deploying AI at scale in real-world applications.
As part of the deal, Tesla and xAI also entered into a framework agreement to evaluate potential AI collaborations between the companies.
“Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale,” Tesla said. The transaction is subject to regulatory approvals and is expected to close in the first quarter of 2026.
The disclosure comes as Tesla shareholders are pursuing lawsuits accusing Musk of creating conflicts of interest through his founding of xAI. Musk has previously said Tesla did not need xAI to develop its own AI capabilities.
“Tesla is also expanding its AI ambitions, but it is doing so by investing in Elon Musk’s xAI start up,” said Kathleen Brooks, research director at XTB. “As Tesla evolves, it is ultimately moving away from being a pure car company and towards becoming an AI conglomerate.”