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Elon Musk is aiming to make X (formerly Twitter) a key player in the A.I. race, while he’s also looking to integrate more A.I. elements into Tesla, in order to re-align both companies around the advancing tech.

And that, seemingly, is leading to conflicts, which could prompt concerns among Tesla investors.

According to a new report from CNBC, Musk recently transferred around $500 million worth of A.I. hardware from Tesla to X, as he looks to give X a boost in its A.I. plans.

As per CNBC:

On Tesla’s first-quarter earnings call in April, Musk said [Tesla] will increase the number of active H100s, Nvidia’s flagship artificial intelligence chip, from 35,000 to 85,000 by the end of this year. He also wrote in a post on X a few days later that Tesla would spend $10 billion this year “in combined training and inference A.I.” But emails written by Nvidia senior staff and widely shared inside the company suggest that Musk presented an exaggerated picture of Tesla’s procurement to shareholders. Correspondence from Nvidia staffers also indicates that Musk diverted a sizable shipment of AI processors that had been reserved for Tesla to his social media company X, formerly known as Twitter.

According to Nvidia staff, Musk has not ordered anywhere near this number of H100 chips, which is the “exaggerated view” portion, while Musk recently diverted many of these chips to X, to help power its xAI projects, including Grok, its A.I. chatbot.

In response Musk has explained that the expensive hardware was going to sit dormant until Tesla’s Giga Texas expansion is complete, which has faced various delays. As such, the transfer of the units to X is a temporary solution to ensure that they’re maximizing their usage, advancing both projects, but not at the expense of one or the other.

Musk hasn’t commented on the note that he overstated Tesla’s hardware procurement plans.

Musk’s explanation makes sense, that the chips are better off being put to use, rather than waiting for Tesla’s systems to be ready. But at the same time, it highlights a conflict of interest between the two companies, which could become problematic, as they both look to move further into A.I.

Yet, at the same time, it will give xAI a significant boost, which it likely needs if it wants to keep up with better resources rivals in the A.I. race.

For context, Meta’s reportedly looking to acquire more than 350,000 additional Nvidia H100 GPUs by the end of this year, dwarfing both X and Tesla’s capacity plans.

The question then is whether xAI is able to maintain that momentum as Tesla then reclaims this hardware at some stage. Maybe, it’s possible that both companies can use the same hardware stack, at least to some degree, but that, again, leads to a conflict between the two which could ultimately see Musk’s bigger business, in Tesla, lose out.

I don’t claim to understand the nuances of A.I. hardware, and how exactly this may or may not work. But it does seem like X is looking to piggyback off of Tesla to boost its A.I. capacity, and that this could lead to further challenges in operation, as both look to branch further into the latest tech.

In any event, it does seem like xAI is going to get at least a temporary boost, which could be critical if it wants to keep up with the competition.

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