A group of Tesla shareholders has filed a lawsuit against Elon Musk, accusing him of breaching his fiduciary duty by founding the rival AI company, xAI, and diverting resources from Tesla to his new venture.
The plaintiffs claim that Musk and the Tesla board knowingly redirected talent and resources away from the company to support xAI, which was established in 2023 with the goal of understanding “the true nature of the universe.”
The lawsuit was filed in Delaware, where Tesla is incorporated, just hours before shareholders were set to vote on a proposal to move the company’s incorporation to Texas after a Delaware court judge voided Musk’s substantial pay package.
The plaintiffs, including the Cleveland Bakers and Teamsters Pension Fund and individual shareholders Daniel Hazen and Michael Giampietro, allege that Musk has long tried to position Tesla as more than just a car company, but as a leader in robotics and AI. This vision helped drive Tesla’s stock price to unprecedented heights, making the company more valuable than many top automakers combined.
The lawsuit states that Musk has been diverting scarce talent and resources from Tesla to xAI and raised billions for xAI while promoting its access to Tesla’s AI-related data. Recently, xAI secured $6 billion in its initial funding round to bring its first products to market. One of its launches includes Grok, an edgier version of OpenAI’s ChatGPT, available exclusively to Premium subscribers on X.
The plaintiffs argue that this diversion of resources and focus has harmed Tesla and its shareholders, and they seek to hold Musk and the board accountable for their actions.
