Elon Musk has been draining Tesla's AI talent dry, shareholders allege in lawsuit

• Tesla shareholders say Elon Musk has been diverting AI resources away from the company.

• They allege in a new lawsuit that Musk has treated the company with "brazen disloyalty."

• Tesla's board, they argue, has done nothing to stop him.

Some Tesla shareholders allege Elon Musk has been draining the company's AI talent dry in an act of "brazen disloyalty" to his company.

The group of shareholders — the Cleveland Bakers and Teamsters Pension Fund, Michael Giampietro, and Daniel Hazen — filed a lawsuit Thursday on behalf of Tesla itself against Musk and Tesla in Delaware, where the company is incorporated.

In it, the shareholders accuse Musk of diverting critical AI talent and resources away from Tesla and into his new AI-focused company, xAI.

They also allege that Tesla's board hasn't tried to stop him.

Representatives for Tesla did not immediately respond to a request for comment.

The plaintiffs allege in the suit that Musk has recently touted Tesla as more of an artificial-intelligence company than simply an electric-car maker.

He has, for example, repeatedly said that building out AI capabilities is essential to Tesla's growth and success, doubling down on this commitment both to investors and in Securities and Exchange Commission filings, the lawsuit says.

During Tesla's quarterly earnings report in April, the company gave investors a sneak peek at its plans for a robo-taxi fleet, sending the stock soaring despite posting weak financial data.

But the plaintiffs say that ever since he founded xAI in 2023, Musk has poached AI-focused employees from Tesla and into his startup. At one point, in response to a suggestion that a major AI researcher should work for Tesla, Musk publicly commented that he should join xAI instead, the lawsuit says.

It's not just AI talent that Musk is accused of pilfering from Tesla — the shareholders also allege that Musk has redirected critical Nvidia graphics processing units from Tesla to xAI, despite previously saying that the car company would gobble up the hardware as fast as Nvidia could deliver it.

And Musk has flirted with focusing his AI efforts outside Tesla unless he gets a bigger stake in the company.

In January, Musk posted on X: "I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can't be overturned. Unless that is the case, I would prefer to build products outside of Tesla." The shareholders referenced that post in their lawsuit.

As for Tesla's board of directors, the shareholders allege it's just bowing down to Musk.

"Consistent with its long history of obsequiousness to Musk, the Tesla Board has utterly failed to even attempt to meet its unyielding fiduciary duty to protect the interests of Tesla and its stockholders in the face of Musk's brazen disloyalty," the suit says.

The shareholders demand that Musk and Tesla's board answer for what the suit says is their "disloyalty" and return what it describes as the value that Musk has pulled away from Tesla.

Quite a lot of company value has been lost from Tesla of late, though it's unclear whether that's solely due to Musk's actions around talent.

Tesla's stock has dropped more than 25% this year; some critics have argued Musk is being distracted by other projects.

The sharp decline in Tesla stock has even affected Musk's proposed pay package, dropping it from an estimated $55 billion to $45 billion.

Read the original article on Business Insider