Elon Musk told Nvidia to send AI chips reserved for Tesla to X, xAI

Elon Musk claims he can grow Tesla to “a leader in AI and robotics,” an ambition he says will require many expensive processors Nvidia to build its infrastructure.

During Tesla's first-quarter earnings call in April, Musk said the electric vehicle company will increase the number of active H100s — Nvidia's flagship artificial intelligence — from 35,000 to 85,000 by the end of this year. Him too wrote in a post on X a few days later that Tesla would spend $10 billion this year “on combined training and inference AI.”

But emails written by Nvidia's senior staff and shared widely within the company suggest Musk presented an exaggerated view of Tesla's tenders to shareholders. Correspondence from Nvidia executives also shows that Musk diverted a significant shipment of AI processors earmarked for Tesla to his social media company X, formerly known as Twitter.

Shares fell as much as 1% following the news in premarket trading.

In ordering Nvidia to give privately held that Tesla says it needs. to develop autonomous vehicles and humanoid robots.

“Elon is prioritizing the deployment of “In return, the original X orders of 12,000 H100 for January and June will be forwarded to Tesla.”

In a more recent email from Nvidia, from late April, Musk's comments on Tesla's first quarter call said “conflicts with bookings” and that his April post to is with bookings and forecasts for the 2025 financial year.” The email referenced news of Tesla's ongoing, drastic layoffs and warned that workforce reductions could cause further delays with an “H100 project” at Tesla's Texas Gigafactory.

The new information from the emails, read by CNBC, highlights an escalating conflict between Musk and some irritated Tesla shareholders who are questioning whether the billionaire CEO is meeting his obligations to Tesla while running a collection of other companies that need his attention, require resources and significant amounts of money. amounts of capital.

A spokesperson for Nvidia declined to comment for this story. Musk and representatives from X and Tesla did not respond to requests for comment.

Critics say Musk is only a part-time CEO of Tesla, the company responsible for the vast majority of his wealth. Musk is also the CEO of space company SpaceX, the founder of Neuralink, a brain-computer interface startup, and The Boring Co. He also owns X, which he acquired for $44 billion in late 2022, when it was still called Twitter. He launched his AI startup, xAI, in 2023.

X and xAI are closely intertwined. In a post on X in November, Musk wrote: “X Corp investors will own 25% of xAI.” Additionally, xAI is using some capacity in X data centers to do some of its training and inference for the large language models behind its chatbot, called Grok, CNBC has learned.

Musk has pitched Grok, originally called Truth GPT, as a politically incorrect chatbot with “a rebellious streak” and a potential competitor to OpenAI's ChatGPT and other generative AI services.

As Musk juggles his many ventures, Tesla shareholders have reason to worry. The company is in the midst of a troubling sales decline, partly due to its aging electric vehicle lineup and increased competition. His reputation has also suffered in the US, according to the Axios Harris Poll 100 surveywho attributed some of the derailments to Musk's “antics” and “political rants.”

Tesla's stock price is down 29% this year.

Instead of discussing electric vehicle sales or the massive restructuring underway at Tesla, Musk is encouraging investors to focus on future products that he has been promising for years but has yet to deliver. That includes AI software to turn existing cars into self-driving vehicles, special robotaxis that can make money for their owners, and a driverless transportation network.

“If someone doesn't believe Tesla is going to solve autonomy, I don't think he or she should be an investor in the company,” Musk said during the April earnings call. “We will, and we are.”

To get there, he says, Tesla needs enough Nvidia GPUs that specialize in AI training and workloads. These chips are available in limited quantities due to rising demand Googling, Amazon, Meta, MicrosoftOpenAI and others.

Nvidia, now the third most valuable company in the world with a market cap of $2.8 trillion, says it is struggling to meet demand. Between the cloud service providers and the companies developing AI models, customers are consuming “every GPU out there,” Nvidia CEO Jensen Huang said during an earnings call in May, after the chipmaker reported sales growth of more than 200% for the third consecutive quarter.

At Tesla, Musk has promised one $500 million “Dojo” supercomputer Buffalo, New Yorkand a “super-dense, water-cooled supercomputer cluster” at the company's factory Austin, Texas. The technology could potentially help Tesla develop the computer vision and LLMs needed for robots and autonomous vehicles.

At xAI, which is racing to compete with OpenAI, Anthropic, Google and others in developing generative AI products, Musk is also trying to build “the world's largest GPU cluster” in North Dakota, with some capacity online in June, according to an internal Nvidia email from February.

The memo described a “Musk mandate” to make all 100,000 chips available to xAI by the end of 2024. noted that the LLM behind xAI's Grok was dependent on Amazon and Oracle cloud infrastructure, where X provides additional data center capacity.

The information previously reported some details of xAI's data center ambitions.

On May 26, xAI said it was a $6 billion financing round led by many of the same investors who funded Musk's Twitter takeover. The company was founded in March 2023, but Tesla did not announce its formation at the time, and it took four months for Musk to publicly introduce the startup.

While Musk has said for years that Tesla is a leader in AI, he wrote in a message on X in January that he would want more control over the company before moving further in that direction.

“I feel uncomfortable growing Tesla into a leader in AI and robotics without having ~25% voting control. Enough to be influential, but not so much that I can't be overthrown,” he said in the post.

Tesla's latest submit a power of attorney indicates that Musk holds 20.5% of the company's outstanding shares, a figure that includes options granted to Musk as part of his unprecedented 2018 CEO compensation package. A Delaware court has ordered that the compensation be rescinded . The post-trial procedure is still ongoing and subject to appeal.

If he fails to achieve his desired ownership brand, Musk said in the January post, he would “prefer to build products outside of Tesla.” He already does that at xAI.

Musk's comments at the time riled some long-standing bulls, including the company's largest retail shareholder, Leo Koguan, and Gerber Kawasaki's Ross Gerber, who characterized his demand as “blackmail.”

Joel Fleming, a securities attorney with the Equity Litigation Group, said Musk is making his conflicts of interest clearly visible by letting his private companies jump ahead of Tesla in purchasing critical hardware.

“When you have someone like Mr. Musk who is a fiduciary for multiple companies, the law recognizes that this creates conflict,” Fleming said. “If you owe fiduciary duties to two or more companies competing for the same things, you can end up channeling business opportunities from one company to another.”

Fleming, who regularly represents investors in public companies in shareholder disputes, said that in such situations, other executives would be in the best position to make decisions, while those in conflict should recuse themselves.

“That has not historically been the path that Mr. Musk has chosen for himself,” Fleming said.

Musk hasn't been shy about mixing corporate resources among his companies.

For example, after taking over Twitter, Musk enlisted dozens of Autopilot software engineers and other Tesla technical and administrative staff to help him implement sweeping changes to the company. Some employees even work for two Musk companies at the same time.

At xAI, Musk has also poached employees from Tesla, including machine learning scientist Ethan Knight, and at least four other former Tesla employees who had been involved in Autopilot and big data projects there before joining the startup.

A former Tesla supply chain analyst, who asked not to be named to discuss sensitive matters, told CNBC that Musk has always viewed his companies as an extension of his personality and believed he could do whatever he wanted with them . That includes Tesla's 2016 acquisition of SolarCity, where he was chairman and top shareholder.

However, the person said that diverting a large batch of chips from Tesla to X is extreme given the scarcity of Nvidia technology. The decision means the automaker willingly gave up valuable time that could have been used to build out its supercomputer cluster in Texas or New York and further develop the models behind its self-driving software and robotics.

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