Tesla has officially committed roughly $2 billion to acquire a stake in xAI, the artificial intelligence startup founded by Elon Musk. The deal, disclosed during Tesla’s Q4 2025 earnings report on Wednesday, sees the automaker participating in xAI’s massive Series E funding round, which values the AI firm at an estimated $230 billion.
The investment follows months of speculation and a previously rejected proposal for a larger $5 billion stake. This time, Tesla moved forward by acquiring preferred stock on the same “market terms” as other major investors, including SpaceX, which also contributed $2 billion to the round.
A New Framework for Collaboration
Beyond the cash infusion, Tesla and xAI have signed a formal framework agreement to evaluate future AI collaborations. Tesla is positioning the move as a key part of its Master Plan Part IV, which aims to bridge the gap between digital intelligence and the physical world.
While xAI focuses on digital products like its Grok large language model, Tesla plans to use that expertise to accelerate its own physical AI projects. This includes the development of unsupervised self-driving technology and the Optimus humanoid robot, both of which Musk claims will define the company’s future.
Legal and Strategic Tensions
The $2 billion deal comes at a complicated time. Tesla is currently facing a lawsuit from shareholders who argue that Musk breached his fiduciary duties by launching xAI in the first place, claiming he diverted talent and hardware away from the automaker to benefit his private venture.
Despite the legal noise, Musk remains bullish on the synergy between his companies. “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 company stated in its shareholder deck.
The transaction is subject to standard regulatory approvals and is expected to close within the first quarter of 2026.