Elon Musk ordered Nvidia to ship thousands of AI chips reserved for Tesla to X and xAI

Elon
Musk
says
he
can
grow


Tesla
into
“a
leader
in
AI
&
robotics,”
an
ambition
that
he’s
said
will
require
a
lot
of
pricey
processors
from


Nvidia
to
build
up
its
infrastructure.

On
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
chip
—
from
35,000
to
85,000
by
the
end
of
this
year.
He
also

wrote
in
a
post
on
X
a
few
days
later
that
Tesla
would
spend
$10
billion
this
year
“in
combined
training
and
inference
AI.”

But
emails
written
by
Nvidia
senior
staff
and
widely
shared
inside
the
company
suggest
that
Musk
presented
an
exaggerated
picture
of
Tesla’s
procurement
to
shareholders.
Correspondence
from
Nvidia
staffers
also
indicates
that
Musk
diverted
a
sizable
shipment
of
AI
processors
that
had
been
reserved
for
Tesla
to
his
social
media
company
X,
formerly
known
as
Twitter.

Tesla
shares
slipped
as
much
as
1%
on
the
news
Tuesday
morning.

By
ordering
Nvidia
to
let
privately
held
X
jump
the
line
ahead
of
Tesla,
Musk
pushed
back
the
automaker’s
receipt
of
more
than
$500
million
in
graphics
processing
units,
or
GPUs,
by
months,
likely
adding
to
delays
in
setting
up
the
supercomputers
Tesla
says
it
needs
to
develop
autonomous
vehicles
and
humanoid
robots.

“Elon
prioritizing
X
H100
GPU
cluster
deployment
at
X
versus
Tesla
by
redirecting
12k
of
shipped
H100
GPUs
originally
slated
for
Tesla
to
X
instead,”
an
Nvidia
memo
from
December
said.
“In
exchange,
original
X
orders
of
12k
H100
slated
for
Jan
and
June
to
be
redirected
to
Tesla.”

A
more
recent
Nvidia
email,
from
late
April,
said
Musk’s
comment
on
the
first-quarter
Tesla
call
“conflicts
with
bookings”
and
that
his
April
post
on
X
about
$10
billion
in
AI
spending
also
“conflicts
with
bookings
and
FY
2025
forecasts.”
The
email
referenced
news
about
Tesla’s
ongoing,
drastic

layoffs
and
warned
that
head-count
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
agitated
Tesla
shareholders
who
question
whether
the
billionaire
CEO
is
fulfilling
his
obligations
to
Tesla
while
also
running
a
collection
of
other
companies
that
require
his
attention,
resources
and
hefty
amounts
of
capital.

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

Critics
have
said
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
aerospace
company
SpaceX,
the
founder
of
brain-computer
interface
startup
Neuralink
and
tunneling
venture
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
tightly
intertwined.
In
a

post
on
X
in
November,
Musk
wrote,
“X
Corp
investors
will
own
25%
of
xAI.”
Additionally,
xAI
uses
some
capacity
in
X
data
centers
to
run
some
of
its
training
and
inference
for
the
large
language
models
behind
its
chatbot
Grok,
CNBC
has
learned.

Musk
has
pitched
Grok,
originally
named
Truth
GPT,
as
a
politically
incorrect
chatbot
with
“a
rebellious
streak”
and
a
would-be
competitor
to
OpenAI’s
ChatGPT
and
other
generative
AI
services.

While
Musk
juggles
his
many
ventures,
Tesla
shareholders
have
reason
for
concern.
The
company
is
in
the
midst
of
a
troubling
sales
decline
due
in
part
to
its
aging
lineup
of
electric
vehicles
and
increased
competition.
Its
reputation
has
also
suffered
in
the
U.S.,
according
to
the

Axios
Harris
Poll
100
survey,
which
attributed
some
of
the
slippage
to
Musk’s
“antics”
and
“political
rants.”

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

Rather
than
discuss
EV
sales
or
the
massive restructuring underway
at
Tesla,

Musk
has
been
encouraging
investors
to
focus
on
future
products
that
he’s
been
promising
for
years
but
has
yet
to
deliver.
That
includes
AI
software
to
turn
existing
cars
into
self-driving
vehicles,
dedicated
robotaxis
that
can
make
money
for
their
owners,
and
a
driverless
transportation
network.

“If
somebody
doesn’t
believe Tesla’s
going
to
solve
autonomy,
I
think
they
should
not
be
an
investor
in
the
company,”

Musk
said
on
the
April
earnings
call.
“We
will,
and
we
are.”

To
get
there,
he’s
said,
Tesla
requires
plenty
of
Nvidia’s
GPUs
which
are
specialized
for
AI
training
and
workloads.
Those
chips
are
in
limited
supply
due
to
soaring
demand
from


Google,


Amazon,


Meta,


Microsoft,
OpenAI
and
others.

Nvidia,
now
the
third-most-valuable
company
in
the
world
with
a
$2.8
trillion
market
cap,
has
said
it’s
hard
to
keep
up
with
demand.
Between
the
cloud
service
providers
and
the
companies
developing
AI
models,
customers
“are
consuming
every
GPU
that’s
out
there,”
Nvidia
CEO
Jensen
Huang
said
on
an
earnings
call
in
May,
after
the
chipmaker

reported
its
third
straight
quarter
of
more
than
200%
revenue
growth.

Huang
also
said,
on
an
earnings
call
in
February,
that
Nvidia
does
its
best
to
“allocate
fairly
and
to
avoid
allocating
unnecessarily,”
adding
“why
allocate
something
when
the
data
center’s
not
ready?”

In
naming
customers
that
are
already
using
Nvidia’s
next-generation
Blackwell
platform,
Huang
mentioned
xAI
on
the
May
call
alongside
six
of
the
biggest
tech
companies
on
the
planet
as
well
as
Tesla.

Musk
likes
to
tout
his
infrastructure
spending
at
both
companies.

At
Tesla,
Musk
has
promised
to
build
a

$500
million
“Dojo”
supercomputer
in

Buffalo,
New
York,
and
a
“super
dense,
water-cooled
supercomputer
cluster”
at
the
company’s
factory
in

Austin,
Texas.
The
technology
would
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
seeking
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.
It
noted
that
the
LLM
behind
xAI’s
Grok
was
relying
on
Amazon
and


Oracle
cloud
infrastructure,
with
X
providing
additional
data
center
capacity.

The
Information
previously
reported
some
details
of
xAI’s
data
center
ambitions.

On
May
26,
xAI
said
it
closed
a

$6
billion
financing
round
led
by
many
of
the
same
investors
who
funded
Musk’s
Twitter
takeover.
The
company
was
incorporated
in
March
2023,
but
Tesla
didn’t
disclose
its
formation
at
the
time,
and
it
was
four
months
later
before
Musk
publicly

introduced
the
startup.

While
Musk
has
said
for
years
that
Tesla
is
a
leader
in
AI,
he
wrote
in
a

post
on
X
in
January
that
he’d
want
more
control
over
the
company
before
pushing
further
in
that
direction.

“I
am
uncomfortable
growing
Tesla
to
be
a
leader
in
AI
&
robotics
without
having
~25%
voting
control.
Enough
to
be
influential,
but
not
so
much
that
I
can’t
be
overturned,”
he
said
in
the
post.

Tesla’s
latest

proxy
filing
indicates
Musk
has
20.5%
of
the
company’s
outstanding
shares,
a
figure
that
includes
options
awarded
to
Musk
as
part
of
his
unprecedented
2018
CEO
pay
package.
A
Delaware
court
has

ordered
that
compensation
to
be
rescinded.
Post-trial
proceedings
are
ongoing
and
subject
to
appeal.

If
he
is
unable
to
reach
his
desired
ownership
mark,
Musk
said
in
the
January
post,
he
“would
prefer
to
build
products
outside
of
Tesla.”
He’s
already
doing
that
at
xAI.

Musk’s
comments
in
the
January
post
rankled
some
longstanding
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
litigator
at
Equity
Litigation
Group,
said
that
by
letting
his
private
companies
skip
ahead
of
Tesla
in
procuring
critical
hardware,
Musk
is
making
his
conflicts
of
interest
readily
apparent.

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

Fleming,
who
frequently
represents
public
company
investors
in
shareholder
disputes,
said
that
in
such
situations,
other
executives
would
be
in
the
best
position
to
make
decisions,
while
those
who
are
conflicted
should
abstain.

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

Musk
hasn’t
been
shy
about
intermingling
corporate
resources
among
his
companies.

For
example,
following
his
buyout
of
Twitter,
Musk

enlisted
dozens
of
Autopilot
software
engineers
and
other
technical
and
administrative
employees
from
Tesla
to
help
him
make
sweeping
changes
at
the
company.
Some
employees
even
work
for
two
Musk
companies
at
once.

At
xAI,
Musk
has
also
attracted
employees
away
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
in
order
to
discuss
sensitive
matters,
told
CNBC
that
Musk
has
always
considered
his
companies
as
an
extension
of
his
persona
and
believed
he
can
do
whatever
he
wants
with
them.
That
includes
Tesla’s

2016
acquisition
of
SolarCity,
where
he
was
chairman
and
a
top
shareholder.

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

In
a
post
on
X
following
publication
of
this
story,
Musk
wrote,
“Tesla
had
no
place
to
send
the
Nvidia
chips
to
turn
them
on,
so
they
would
have
just
sat
in
the
warehouse.”
He
said
the
“south
extension”
of
the
Texas
Gigafactory
will
soon
“house
50k
H100s”
for
training
of
self-driving
technology.

Musk
later
added
that,
of
Tesla’s
$10
billion
in
“AI-related
expenditures”
this
year,
$3
billion
to
$4
billion
will
go
to
purchasing
Nvidia
hardware.

WATCH:

Musk
ordered
Nvidia
to
ship
thousands
of
AI
chips
to
X