On June 13, Tesla shareholders filed a lawsuit against CEO Elon Musk and other executives, accusing them of benefiting Musk's AI firm, xAI, at Tesla's expense.

The lawsuit claims that xAI, established by Musk in 2023, has recruited Tesla employees, redirected over $500 million in GPUs from Tesla, and utilized Tesla’s data for xAI's development without proper compensation. The plaintiffs referenced a tweet from Musk threatening to shift AI initiatives away from Tesla unless he was granted 25% voting control in the company. They asserted:

“Musk publicly threatened to divert corporate opportunities from Tesla unless he received significant additional equity.”

The case highlights Musk’s portrayal of Tesla as mainly an AI firm, suggesting that xAI’s growth has negatively impacted Tesla. For instance, Musk described Tesla as an “AI/robotics company that appears to many to be a car company.”

According to the lawsuit, Musk’s actions have generated hundreds of billions of dollars for xAI, significantly costing Tesla.

Numerous remedies are sought

The plaintiffs accuse Musk of breaching his fiduciary duties to Tesla, alleging the same of other board members who they claim cannot impartially evaluate demands against Musk.

Additionally, Musk is accused of unjust enrichment due to the transfer of staff and resources between the companies. The plaintiffs argue:

“It would be unconscionable to permit Musk to retain the improper benefits.”

They have requested the court to award Tesla damages for the staffing and resource diversion, compel Musk to relinquish his equity stake in Tesla, and establish a constructive trust over Musk’s interest in xAI, among other remedies.