Musk bets big on AI while Tesla bets big on Musk

Musk bets big on AI while Tesla bets big on Musk

Elon Musk has spent much of the past few months inside xAI, pushing its Grok models, launching animated chatbots and planning massive data centres, even as Tesla grapples with falling vehicle sales and a slower EV market. Tesla’s board is now asking investors to approve a giant new pay package that could lift Musk’s ownership toward a quarter of the company over the next decade—if he hits sweeping goals in market value, robotics and autonomy. The pitch: securing his focus on Tesla as it becomes an AI-and-robots company, not just an automaker, the Wall Street Journal reported.

Why Musk is camped at xAI

After leaving a short-lived government role earlier this year, Musk re-immersed himself in xAI. He scrapped broad all-hands meetings in favour of late-night one-on-ones, shepherded Grok 4 to release, and pushed a Memphis “Colossus”-scale compute buildout. He also shaped Grok’s tone to be less sanitized and oversaw avatar projects intended to juice engagement, part of a broader bid to close the gap with OpenAI.

The avatar and data controversy

To speed lifelike interactions, xAI asked in-house “AI tutors” to grant licenses to their faces and voices for a confidential project, and later framed audio/video data collection as a job requirement. The flagship avatar, “Ani,” drew users with flirtatious, anime-styled interactions—while unsettling some staff who said replies skewed sexualized. The growth hack raised questions about the company’s claim to build a “maximally truth-seeking AI.”

Tesla’s rough patch—and its AI pivot

Musk still dipped into Tesla work—helping launch a robotaxi service in Austin and touting progress on an in-house AI chip and the Optimus humanoid. But core car sales fell for a second straight quarter, and Musk warned investors of “a few rough quarters.” The strategic narrative from Tesla: autonomy and robotics will ultimately matter more than near-term deliveries, and that future depends on Musk’s leadership.

The pay package and investor diplomacy

An unusually large group of Tesla directors fanned out to meet big shareholders ahead of a vote on Musk’s compensation. The plan would grant enormous upside if Tesla reaches an $8.5 trillion market cap and ships a million Optimus units, among other milestones. Directors argue they can’t force Musk to go full-time, but richer alignment will keep him engaged as Tesla leans harder into AI. Critics, including two major proxy advisors, say the award is outsized and concentrates too much power.

Should Tesla invest in xAI?

Alongside compensation, some shareholders urged Tesla to take a direct stake in xAI. Musk has already woven Grok into certain Tesla experiences, and he casts cross-pollination as a competitive edge for autonomy and robotics. The board has called the tech overlap “small” and offered no recommendation, reflecting investor unease about conflicts and capital priorities even as SpaceX has already invested billions in xAI.

Product urgency versus safety lapses

Pressure to match rivals has at times backfired. In the summer, Grok outputs on X veered into antisemitic and violent content, prompting a temporary shutdown and reprogramming. Internally, xAI tutors were also instructed to benchmark Grok against competing tools and upload results—another sign of a sprint mindset that can collide with guardrails.

Musk’s message to sceptics

Musk insists he’s “very much home,” posting marathon weekend schedules split between Optimus, chip design, and xAI site visits. He frames the compensation vote as a control question: as Tesla turns into a robotics leader, he wants enough equity to ensure he can’t be “kicked out.” If investors balk, he suggests, they should name another CEO who could run what he says is the world’s most valuable car company.

The decision ahead

Shareholders now face a clean trade-off. Approving the package could buy stronger engagement from a leader whose attention is visibly divided but whose vision has repeatedly bent markets. Rejecting it might check concentration of power and potential conflicts with xAI, but risk diluting the very force Tesla says it needs to vault from EV pioneer to AI-robotics platform.