Tesla has disclosed in a letter to shareholders that it has invested $2 billion in Elon Musk’s AI startup, xAI, the company behind the Grok chatbot and owner of the social media platform X. The investment comes just weeks after xAI announced a $20 billion Series E funding round, which included major backers such as Valor Equity Partners, Fidelity, Qatar Investment Authority, and strategic investors Nvidia and Cisco. The move marks a highly circular arrangement, as Musk is both CEO of Tesla and founder of xAI. The investment had previously been subject to shareholder approval. In November, Tesla shareholders voted on a nonbinding proposal to allow the board to authorize funding for xAI. While over 1.06 billion votes were cast in favor, the measure was ultimately rejected due to the high number of abstentions—counted as votes against under Tesla’s bylaws—resulting in more than 916 million votes opposing the plan. Despite the rejection, Tesla proceeded with the investment, citing alignment with its latest vision outlined in Master Plan Part IV. The company emphasized that Tesla is focused on bringing AI into the physical world through its vehicles, robotics, and infrastructure, while xAI is advancing cutting-edge digital AI, including its large language model Grok. The investment is part of a broader framework agreement designed to explore potential collaborations between the two companies. Tesla highlighted existing ties with xAI, including the supply of Megapack battery systems to power xAI’s data centers, as well as the integration of Grok into select Tesla vehicles. Bloomberg also reported that xAI has plans to develop AI for humanoid robots, such as Tesla’s Optimus, further aligning the two companies’ long-term goals. Musk defended the investment during Tesla’s earnings call, stating that while Tesla can handle many tasks internally, partnering with xAI can accelerate progress in key areas. “If there are things xAI can help us with, why not do that?” he asked. “This is part of our strategic initiative.” In its letter, Tesla noted that the investment and collaboration framework are intended to strengthen its ability to scale AI-driven products and services in the physical world. The company also reiterated its aggressive capital expenditure plans, citing major investments in vehicle autonomy and the upcoming mass production of Optimus robots. Musk described the year as a pivotal moment for Tesla, with significant capital spending aimed at building “an epic future.” The transaction is expected to close in the first quarter. Tesla reported stronger-than-expected earnings and revenue, though its profit declined by 46% year-over-year.