Why Tesla investors should care about Elon Musk's multiplying ventures

Elon Musk's aggregate ventures and the relationships betwixt them are facing accrued scrutiny arsenic the Tesla CEO continues to adhd much to his plate.

During Tesla's second-quarter net call connected Wednesday, Truist expert William Stein asked Musk astir yet different tech venture helium has started up and incorporated successful Nevada: xAI. Musk precocious said that the artificial quality startup aims to vie with Google Bard oregon OpenAI's ChatGPT someday, and plans to collaborate with Tesla connected bundle and silicon alike.

Stein asked him, "For investors that deliberation determination mightiness beryllium rather a spot of worth successful the AI features and products of Tesla, it mightiness beryllium concerning to spot you pursuing different endeavor wherever AI is the focus. Can you speech astir however xAI mightiness overlap, mightiness possibly vie with Tesla oregon successful different ways possibly it enhances the worth of what Tesla does?"

Musk claimed that xAI and its absorption artificial wide quality connected would bring immoderate worth to Tesla, and talked astir recruiting arsenic an example.

"There were conscionable immoderate of the world's champion AI engineers and scientists that were consenting to articulation a startup but they were not consenting to articulation a large, benignant of comparatively established institution similar Tesla." He added, "So I was like, OK well, amended it's a startup that I tally than they spell enactment determination else. That's benignant of the genesis of xAI."

In summation to the xAI example, helium said helium was lone capable to entice a apical materials subject technologist distant from his occupation astatine Apple by promising the technologist could enactment concurrently for SpaceX and Tesla. The technologist successful question, Charles Kuehmann, joined Tesla successful precocious 2015 and present holds the rubric of vice president of SpaceX and Tesla materials engineering, reporting straight to the CEO.

The contented of Musk and his aggregate ventures besides came up earlier this month, erstwhile Sen. Elizabeth Warren, D-Mass., urged the Securities and Exchange Commission to investigate its Twitter ties and related firm governance issues.

Musk led a $44 cardinal buyout of the societal media institution past twelvemonth and appointed himself CEO determination temporarily. He is present the controlling shareholder, CTO and enforcement seat of Twitter portion holding down the CEO relation some astatine Tesla and astatine his aerospace and defence company, SpaceX. He's besides the laminitis and funder astatine the brain-computer interface startup Neuralink and tunneling task The Boring Co.

Tesla is the lone nationalist institution among the bunch. And it has ne'er disclosed to shareholders precisely however overmuch talent, clip and wealth it has spent helping Musk astatine his different ventures, oregon why sending radical implicit to Twitter would comprise a tenable usage of Tesla resources. Musk antecedently enlisted Tesla, SpaceX and The Boring Co. employees to assistance him with his Twitter takeover, arsenic CNBC reported.

At slightest 1 elder Tesla worker has jumped vessel to Musk's X Corp., the genitor institution of Twitter. Court filings revealed that Dhruv Batura, who had worked astatine Tesla since precocious 2013 and was a elder manager of concern operations concern there, is present a elder manager of concern astatine X Corp. Batura was posting occupation ads for X Corp. connected Twitter connected the time of Tesla's second-quarter net report.

In a May 2023 proxy filing, Tesla did disclose a fewer details astir its related enactment transactions. Among these, Tesla revealed that "Twitter is enactment to definite commercialized and enactment agreements with Tesla. Under these agreements, Twitter incurred expenses of astir $1.0 cardinal successful the aggregate successful 2022 and $0.4 cardinal successful 2023 done February." Tesla hasn't said what, exactly, Twitter is buying from the company.

According to London School of Economics prof of organizational behavior, Randall S. Peterson, "Musk is making a convoluted statement successful saying 'I americium helping Tesla by keeping these large radical from joining a competitor.' It's a counter-factual you cannot ever truly trial oregon situation successful an investigation."

Most startups fail, Peterson noted, and radical who privation to make startups were astir apt not apt to articulation Tesla's nonstop competitors successful the automotive industry.

Peterson said Musk's galore ventures tin make risks for Tesla, and shareholders should question much details.

"It's hard to absorption connected and excel astatine immoderate 1 happening erstwhile you tally aggregate companies," Peterson said. "That's a hazard astir the CEO himself. Would astir companies' shareholders tolerate their CEO moving respective different companies astatine the aforesaid time? The reply to that is astir apt no. So that raises a question of what the Tesla committee is doing, whether they are autarkic astatine immoderate level, oregon are truthful enamored of Musk that they not lone tolerate his antithetic mode of working, but mightiness beryllium missing important cardinal problems arsenic agelong arsenic the wealth keeps coming."

Boards astatine companies that person ended up successful crisis, similar Enron and the Royal Bank of Scotland, failed to rein successful their CEOs contempt signs of problems for galore quarters, helium noted.

Another risk, Peterson said, is that Musk's employees whitethorn consciousness unit to enactment connected galore projects astatine erstwhile for him concurrently, extracurricular of Tesla. In a quest to delight him oregon rack up caller enactment experience, employees whitethorn neglect to recuperate from their enactment and burnout. Burnout, helium said, tin pb to precocious attrition oregon mediocre performance.

Finally, the prof noted, Musk whitethorn beryllium creating distractions that impede absorption among his employees, adjacent if his volition is to cross-pollinate among his businesses.

"You request to beryllium super-focused to beryllium the champion astatine something, some arsenic an idiosyncratic and arsenic a corporation. That's the crushed we person seen a inclination distant from conglomerates which were large successful the 70s to companies that are much focused today," the prof said.

Still, Musk appears to beryllium doubling down connected unapologetic collaborations betwixt companies successful his increasing empire.

On Wednesday's call, helium was asked to springiness an update connected Tesla's advancement processing a humanoid robot dubbed Optimus. Musk waxed connected successful a futuristic vein, saying that Tesla whitethorn 1 time collaborate with Neuralink to marque robotic, prosthetic arms and legs to assistance amputees instrumentality to afloat mobility oregon dexterity.

Tesla did not instantly respond for a petition for comment. Twitter responded with an automated reply containing a crude symbol.

— CNBC's Rohan Goswami contributed reporting.