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Elon Musk Faces Another Shareholder Lawsuit; Sued By Tesla Shareholders Over Rival AI Company

Jesse Fulton

According to a report from TechCrunch, Elon Musk is embroiled in yet another shareholder lawsuit. In this case, a group of Tesla shareholders alleged that Mr. Musk’s start-up artificial intelligence (AI) company X.AI Corp. (xAI) represents a conflict of interest. Specifically, he is accused of diverting resources from Tesla. Here, our Miami shareholder litigation attorney provides a comprehensive overview of the case.

Elon Musk Launched AI Company in March of 2023 

Elon Musk founded a new artificial intelligence company—X.AI Corp. (xAI)— in March 2023. The start-up business adds to his diverse portfolio of technology-focused enterprises. Notably, in 2023 and 2024, Mr. Musk  raised a significant amount of money from investors for xAI. The company secured $6 billion during its Series B funding round—bringing the total valuation to $24 billion.

 Tesla Shareholders Allege Conflict of Interest 

Elon Musk made major headlines earlier this year when a Delaware court invalidated his record-breaking executive compensation package from Tesla on the grounds that it was not in the best interests of shareholders. Mr. Musk is facing another shareholder lawsuit. The new claim is from a group of Tesla shareholders who allege a conflict of interest over his AI company, xAI. More specifically, the lawsuit alleges that Musk improperly diverted Tesla corporate resources—including thousands of Nvidia H100 GPUs intended for Tesla—to xAI. Notably, Tesla has been investing heavily in AI. It is spending nearly $10 billion this year on AI-related training and development.

 What is a Conflict of Interest (Shareholder Law)? 

A conflict of interest in shareholder law occurs when a person in a position of trust—most often a major insider such as a corporate officer or corporate director—has competing interests that could interfere with their duty to act in the best interests of the company and its shareholders. The situation can arise when personal, financial, or other interests potentially influence their decisions.

 When Shareholders Can Sue Over a Conflict of Interest 

Shareholders can sue over a conflict of interest when they believe corporate officers or directors have acted in their own interest rather than in the best interest of the company. Most often, this type of claim involves filing a derivative lawsuit on behalf of the corporation to address the alleged breach of fiduciary duty.

To bring a successful claim, shareholders must demonstrate that the conflict resulted in harm to the company or shareholders. In Florida, courts will examine whether the officers or directors fully disclosed their interests and whether the transactions were fair and reasonable to the corporation​ given the specific circumstances surrounding the company.

 Call Our Miami, FL Shareholder Litigation Lawyer Today

At Pike & Lustig, LLP, our Miami shareholder litigation attorneys are devoted to solutions-focused legal advocacy. If you have any questions or concerns about a shareholder dispute, please do not hesitate to contact today for a strictly confidential, no commitment case review. Our firm handles shareholder law matters throughout all of South Florida.



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