Tesla has confirmed a $2 billion investment in xAI, Elon Musk’s artificial intelligence (AI) startup. The move comes months after Tesla shareholders voted against a proposal that would have authorized a potential investment of up to $5 billion, a distinction that helps explain how the company was able to proceed despite the earlier vote.
According to Tesla’s statement, which was included under “Other Updates” in the Q4 2025 shareholder deck, the company entered into an agreement on January 16, 2026, to acquire shares of Series E Preferred Stock of xAI as part of a previously disclosed financing round. Tesla emphasized that the investment was made on market terms consistent with those accepted by other investors.
“On January 16, 2026, Tesla entered into an agreement to invest approximately $2 billion to acquire shares of Series E Preferred Stock of xAI as part of their recent publicly-disclosed financing round.”
Tesla framed the deal as a strategic extension of Master Plan Part IV, which focuses on embedding AI into real-world products. While Tesla applies AI to physical systems like vehicles, robotics, and energy infrastructure, xAI is focused on digital AI platforms, including its large language model, Grok.
Alongside the equity investment, Tesla and xAI also signed a framework agreement designed to formalize how the two companies may collaborate in the future.
“Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale.”
The transaction remains subject to regulatory approval, with Tesla expecting the deal to close in Q1 2026.
Why the Investment Is Controversial
The announcement is notable because Tesla shareholders voted against a proposal in November 2025 that would have authorized a potential xAI investment. The measure failed after 473 million abstentions were counted as “no” votes under Tesla’s corporate rules, bringing the total “no” count to 1.39 billion, above the 1.06 billion “shares “yes” votes.
The proposal was non-binding, but the result was widely interpreted as a setback for Musk’s plan to deepen Tesla’s financial ties to xAI. At the time, Tesla’s General Counsel Brandon Ehrhart signaled the board was not closing the door entirely, saying it would “consider next steps in light of this level of shareholder support.”
Tesla appears to have done exactly that—moving forward with a smaller investment than the originally discussed $5 billion, and structuring it as a preferred equity stake paired with a collaboration framework rather than a broad authorization.
Legal Questions May Follow
The move could draw scrutiny from shareholders and investors, particularly given Musk’s leadership roles across both companies. However, non-binding shareholder votes do not prevent boards from acting, provided directors fulfill their fiduciary duties and transactions are conducted at arm’s length.
Tesla also pointed to its existing relationship with xAI, which already includes Grok integration in Tesla vehicles and a major Megapack battery purchase by xAI to power its AI infrastructure.
