Elon Musk's decision to redirect Nvidia's AI chips from Tesla to his other companies, X and xAI, raises concerns among Tesla shareholders.

Elon Musk claims to be able to make Tesla a leader in artificial intelligence (AI) and robotics, an ambition that will require a large number of expensive Nvidia processors to develop its infrastructure.

During Tesla's first-quarter earnings call in April, Musk stated that the company will increase the number of active H100s - Nvidia's flagship AI chip - from 35,000 to 85,000 by the end of the year.

A few days later, he wrote on X (formerly Twitter) that Tesla would spend $10 billion this year on AI training and inference.

Divergence between Announcements and Reality

However, emails written by senior Nvidia executives, widely shared within the company, suggest that Musk presented an exaggerated picture of Tesla's supply to shareholders.

These correspondences also indicate that Musk diverted a significant delivery of AI processors initially reserved for Tesla to his social media company, X.

Repercussions for Tesla

By ordering Nvidia to prioritize X over Tesla, Musk delayed the receipt of over $500 million in graphics processing units (GPUs) by the automaker for several months, which is likely to add delays to the setup of the supercomputers needed by Tesla to develop autonomous vehicles and humanoid robots.

A December memo from Nvidia states: "Elon prioritized the deployment of the H100 GPU cluster to X at the expense of Tesla by redirecting 12,000 H100s initially planned for Tesla to X." In exchange, X's initial orders of 12,000 H100s planned for January and June will be redirected to Tesla.

Reactions and Conflicts of Interest

This new information highlights a growing conflict between Musk and some Tesla shareholders who question his commitment to the automaker while managing several other companies requiring his attention, resources, and considerable amounts of capital.

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

Musk's Role in Multiple Companies

Critics claim that Musk is only a part-time CEO of Tesla, the company responsible for most of his wealth. He is also the CEO of SpaceX, the founder of Neuralink and The Boring Company, and the owner of X.

Musk launched his AI startup, xAI, in 2023. X and xAI are closely linked, with xAI using part of X's data center capacity to run training and inference for the large language models behind its chatbot Grok.

Concerns of Tesla Shareholders

While Musk juggles his many companies, Tesla shareholders have reason to worry. The company is experiencing a worrying decline in sales, partly due to an aging vehicle lineup and increased competition.

Its reputation has also suffered in the US, with some attributing this degradation to Musk's "eccentricities" and "political diatribes." Tesla's stock price has dropped 29% this year.

Conclusion

While Musk encourages investors to focus on future products, such as AI software for autonomous vehicles, dedicated robotaxis, and a driverless transport network, it is clear that Tesla needs numerous Nvidia GPUs, specialized for training and AI workloads.

However, the demand for these chips exceeds the available supply, making Musk's decision to redirect Tesla's GPUs to X all the more controversial.