A group of Tesla investors has filed a lawsuit against Elon Musk, Tesla, and its board members, claiming that Tesla suffered harm due to Musk's diversion of resources to his xAI venture. The lawsuit, filed in the Delaware Court of Chancery, alleges that Tesla employees were poached by xAI, and microchips and data were diverted without compensation to Tesla.

The lawsuit, brought forth by three Tesla shareholders, seeks financial damages for Tesla as well as the disgorging of Musk's equity stake in xAI. The plaintiffs argue that Musk's actions are comparable to a CEO starting a competing business on the side and diverting resources from the main company, and that Tesla's board allowed this conduct to continue.

Tesla and Musk have emphasized the importance of artificial intelligence in Tesla's future, with Tesla being described as an AI company. However, the lawsuit claims that Musk founded xAI as a competing company and subsequently redirected talent and resources from Tesla to xAI with the apparent approval of the board.

According to the lawsuit, after establishing xAI in March 2023, Musk hired several key AI-focused employees away from Tesla to join xAI. Additionally, Nvidia GPUs were diverted from Tesla to xAI and X (formerly Twitter). This GPU diversion was confirmed by Nvidia emails revealed in a CNBC report.

Prior to founding xAI, Musk had allegedly stated that Tesla required more Nvidia H100 GPUs than were available for sale, a common issue in the AI industry. However, after founding xAI, Musk allegedly directed Nvidia to redirect GPUs from Tesla to xAI and X.

The investors involved in the lawsuit dispute Musk's claims of lack of use for the diverted Nvidia chips, citing a post on X following the CNBC report where Musk stated that the chips would have just sat in a warehouse. The complaint also highlights a pitch deck for xAI's potential investors, which mentioned harvesting data from X and Tesla to catch up to competitors like OpenAI and Anthropic.

The lawsuit further alleges that Musk exploited information owned by Tesla to entice potential investors in xAI. It claims that Musk intends to have xAI harvest data from Tesla without appropriately compensating the company, despite X already receiving xAI equity for its data contributions. The lawsuit argues that none of this would have been necessary if Musk had established xAI as a subsidiary of Tesla.

Tesla has yet to respond to the lawsuit. The filing of the complaint was previously reported by TechCrunch.

In a related note, the Delaware Court of Chancery, which nullified Musk's 2018 pay package following a different lawsuit, is the same court where the current lawsuit has been filed. The recent re-approval of the $44.9 billion pay plan by Tesla shareholders does not end the legal battle over Musk's compensation. The lawsuit also draws attention to Musk's threat of building an AI and robotics business within Tesla if he was granted at least 25% voting power.

The lawsuit accuses Tesla's board of permitting Musk to create and grow xAI, hindering Tesla's AI development efforts and diverting value from Tesla to xAI. The close ties between the board members and Musk are seen as a significant factor in the case, with previous court findings pointing to conflicts of interest among several board members.

As this legal battle unfolds, the outcome may have implications for the future of Tesla's AI endeavors and the governance of the company.