On June 13, Tesla shareholders initiated legal action against CEO Elon Musk and other executives, alleging that resources and talent have been redirected from Tesla to Musk's artificial intelligence firm, xAI, to the detriment of Tesla's interests.

The lawsuit, filed in a prominent court, contends that since its establishment in 2023, xAI has reportedly poached Tesla employees, diverted over $500 million worth of GPUs intended for Tesla to xAI, and utilized Tesla's proprietary data for its own AI development without compensating the automaker.

Central to the shareholders' claims is a tweet by Musk threatening to shift AI initiatives away from Tesla unless granted 25% voting control in the company. The plaintiffs argue:

“Musk publicly threatened that he would divert corporate opportunities away from Tesla unless Tesla gave him substantial additional equity.”

The case underscores Musk's characterization of Tesla as primarily an AI company rather than an automotive manufacturer, attributing xAI's growth to actions allegedly detrimental to Tesla. Musk's statements, including labeling Tesla as an "AI/robotics company," are cited to highlight perceived conflicts of interest.

The plaintiffs assert that Musk breached fiduciary duties owed to Tesla and accuse other board members of failing to impartially address demands against Musk. They further allege unjust enrichment due to the movement of personnel and resources between Tesla and xAI, stating:

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

Remedies sought include damages related to resource diversion, disgorgement of Musk's Tesla equity holdings, and establishment of a constructive trust over Musk's stake in xAI. The lawsuit aims to address alleged financial losses incurred by Tesla as a result of Musk's actions.

The legal proceedings are expected to scrutinize the intersection of corporate governance, fiduciary responsibility, and innovation within the technology sector, particularly as it relates to AI development and resource allocation.