Tesla (TSLA) trades at a uniquely high premium, thanks to its charismatic Chief Executive Officer. Elon Musk promises cyber cabs, robotics, self-driving software, and AI. These future products are beyond the declining, negative growth of the electric vehicle business.
Musk increased buying interest in TSLA stock after reportedly considering a merger between xAI and SpaceX. SpaceX is planning an initial public offering (“IPO”).
On January 16, Tesla said that it signed an agreement to invest nearly $2 billion in xAI. The purchase of Series E Preferred stock in xAI is part of the funding round. Tesla explained that it is making products and services that offer AI to the physical world.
Since xAI is developing AI products and services, its efforts would complement Tesla’s needs.
Risk
xAI is best known for the site X, formerly known as Twitter. Unfortunately, Tesla’s transfer of $2 billion in funds to its privately owned company requires scrutiny. The bad news for Tesla shareholders is that the Securities and Exchange Commission is unlikely to take any action. Shareholders might view the fund transfer as a positive development.
Tesla’s EV business faces tremendous pressure this year. BYD (BYDDF) overtook Tesla as the world’s biggest seller of EVs. This is a major setback for Tesla. The U.S. cancelled EV credits, which will accelerate the decline in Tesla vehicle sales volumes.
Tesla said that it would discontinue producing Model X/S vehicles.
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