On September 7, a media report said that two of Musk's companies, artificial intelligence company xAI and electric car Tesla, were discussing a deal. Under the deal, Tesla would trade some of its revenue for support of xAI's big AI models.

Under the proposed arrangement, which Tesla described to investors, the company would license xAI's AI models to power its FSD and share a portion of its revenues with xAI, the report said, according to people familiar with the matter. xAI may also assist Tesla in developing other features, including a voice assistant similar to Apple's Siri or software to power Tesla's humanoid robot, Optimus, the people familiar with the matter said.

The terms of any revenue-sharing agreement between xAI and Tesla would depend in part on how much Tesla relies on xAI's technology, the people familiar with the matter further said, adding that xAI executives have discussed equalizing revenue sharing with Tesla FSD.

Following the publication of the report in question, Musk denied the matter in a reply to a user on X summarizing the story in question, saying he hadn't read the article but that what the report said wasn't accurate.

Musk said Tesla learned a lot from discussions with xAI engineers, which helped accelerate the implementation of unsupervised FSD, but there was no need to license anything from xAI. “The xAI models are gigantic, containing, in compressed form, most of human knowledge, and couldn’t possibly run on the Tesla vehicle inference computer, nor would we want them to.”

Musk explained that Tesla AI models have incredibly “dense” intelligence, as they compress video of reality into driving commands, but must operate on about 300W computer with memory size and bandwidth far lower than say an H100 GPU. Tesla real-world AI also has a vastly larger context size than an LLM, as the combined video history from all cameras is several gigabytes in size.

Although Musk has denied the reports, it's not unusual for people to suspect that Tesla's Autopilot and xAI's AI models will be “swapping resources” given the nature of their businesses.

Moreover, there has been a flow of talent between Tesla and xAI before.

As a startup AI company, xAI has hired several Tesla employees, including several R&D staff directly on Tesla's Autopilot team.

In addition to moving talent, Musk hasn't even let go of Nvidia chips.

Last year, Musk also transferred thousands of NVIDIA GPUs from Tesla to xAI. after it was revealed, Musk bluntly stated that Tesla didn't have room for these chips. Hinted that if you don't give them to xAI, these chips will have to “eat dust” in the warehouse.

In addition, at the beginning of this year, Musk said that he would like to obtain at least 25% of the voting control of the company, which is about double his current shareholding. Musk believes that if his decision can be easily reversed, then he will make artificial intelligence or robotics products outside of Tesla.

However, the transfer of resources between Tesla and xAI has caused discontent among some Tesla shareholders. Several Tesla shareholders have reportedly filed lawsuits claiming that the transfer of resources to xAI has harmed Tesla investors. The cases are pending in the Delaware Court of Chancery.