Elon Musk, the CEO of Tesla and the new owner of social media platform X (formerly Twitter), has ordered chipmaker Nvidia to divert thousands of AI chips from Tesla to X, according to emails obtained by CNBC. This move has the potential to delay Tesla's plans to become a leader in AI and robotics and could set back the company's acquisition of $500 million worth of processors by several months. The diversion of chips also raises questions about Musk's priorities and his ability to balance his various ventures.

Tesla's AI Ambitions and the Role of Nvidia Chips

Tesla has been working to position itself as a major player in the artificial intelligence and robotics space. In an earnings call earlier this year, Musk announced that Tesla would significantly increase its acquisition of Nvidia's H100 AI chips, stating that the company would purchase 85,000 chips by the end of the year, up from the previously planned 35,000. This move was intended to support Tesla's goal of becoming a leader in AI and robotics and to enhance its Full Self-Driving (FSD) technology.

Nvidia's H100 chips are considered some of the most advanced AI processors on the market, and they are in high demand from companies working on AI initiatives. In a post on X, Musk emphasized the importance of these chips for Tesla's future plans, stating that the company would spend $10 billion "in combined training and inference AI". This substantial investment highlights the critical role that AI chips are expected to play in Tesla's autonomous driving technology and its broader robotics initiatives.

Diverting Chips to X: The Impact on Tesla

However, it has now come to light that Musk's plans for the Nvidia chips may not align with his public statements. According to emails from Nvidia employees, Musk has redirected thousands of H100 chips from Tesla to his social media company X, particularly its AI subsidiary, xAI. An Nvidia memo from December stated, "Elon prioritizing X H100 GPU cluster deployment at X versus Tesla by redirecting 12k of shipped H100 GPUs originally slated for Tesla to X instead." This diversion of chips could have significant implications for Tesla and its investors.

The delay in acquiring the Nvidia chips may hinder Tesla's plans to develop fully autonomous vehicles and its upcoming robotaxi vehicle, which is set to be unveiled in August. This delay could also impact the performance and reputation of the company, which has already faced scrutiny over its Autopilot and Full Self-Driving features, with hundreds of crashes and dozens of fatalities. Ensuring the safety and reliability of its autonomous driving technology is crucial for Tesla to maintain consumer trust and confidence in its brand.

Musk's Empire: Juggling Multiple Ventures

Elon Musk's focus on his various ventures outside of Tesla has been a source of concern for the company's shareholders. In addition to his roles as CEO of Tesla and SpaceX, Musk is also the founder of Neuralink and The Boring Company, and the owner of X. He also launched his AI startup, xAI, in 2023, which is now racing against competitors like OpenAI, Google, and others to produce advanced AI applications.

Musk's involvement in multiple companies with diverse interests has led to questions about potential conflicts of interest. By prioritizing his private companies over Tesla, Musk may be favoring his own interests over those of Tesla's shareholders. This has already sparked concerns among investors, who are betting on Musk delivering his promise of fully autonomous vehicles and maintaining Tesla's competitive edge in the market.

The Impact on Tesla's Shareholders and Musk's Pay Package

The diversion of AI chips to X comes at a critical time for Tesla, as shareholders are currently voting on whether to reapprove Musk's 2018 $56 billion compensation package. This package is considered the largest for a CEO in corporate America, and the vote is taking place amidst concerns about Musk's commitment to Tesla and his focus on his other ventures.

In a discussion on X related to his pay, Musk expressed his discomfort with growing Tesla into a leader in AI and robotics without having more voting control. He stated, "I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control… Unless that is the case, I would prefer to build products outside of Tesla." This statement highlights the tension between Musk's ambitions and his willingness to prioritize Tesla over his other companies.

Musk's Response and the Future of Tesla's AI Efforts

In response to the reports, Musk has provided an explanation for the diversion of chips. He wrote on X that Tesla did not have the capacity to utilize the Nvidia chips immediately and that they would have sat idle in a warehouse. Musk also noted that the extension of the Giga Texas factory, which will house 50,000 H100s for Tesla's Full Self-Driving software training, is almost complete. This suggests that while there may be a delay, Tesla's AI ambitions are still on track.

The Complex Dynamics of Musk's Empire

The diversion of AI chips from Tesla to X highlights the complex dynamics of Elon Musk's business empire and the potential challenges that arise when a single individual heads multiple major companies. While Musk has provided assurances that Tesla's AI plans remain a priority, the delay in acquiring the necessary chips could impact the company's short-term goals. As the situation unfolds, it remains to be seen what impact this diversion will have on Tesla's AI ambitions and the broader industry landscape.

As Tesla navigates this delay and continues its work in AI and robotics, the company's performance and the success of its autonomous driving technology will be closely watched by investors and industry observers alike. The outcome of this diversion will also shed light on Musk's ability to balance his various ventures and maintain the confidence of shareholders across his empire.