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"Tesla Chip Redirection: Implications for AI Development and Musk's Priorities"

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Chip Redirection from Tesla to X and xAI

In a strategic move, Elon Musk directed Nvidia to redirect a shipment of approximately 12,000 H100 AI chips, originally intended for Tesla, to his social media platform X and his new AI company xAI in late 2023.

According to internal Nvidia memos obtained by CNBC, this redirection of chips slated for Tesla's Full Self-Driving (FSD) development prioritized building an AI cluster for X, a crucial component of Musk's social media platform, over Tesla. In exchange, a subsequent order of 12,000 H100 chips, initially for X, was redirected to Tesla.

Musk's Explanation

Musk confirmed the chip redirection on X, stating that Tesla did not have enough physical space to store and utilize the Nvidia chips. He reassured that the extension to Tesla's Gigafactory in Austin, Texas, is nearing completion and will house around 50,000 H100 chips for FSD training.

Musk also claimed his previous statements about Tesla investing $10 billion in AI this year were inaccurate. He estimated Tesla's actual Nvidia purchases in 2024 would be around $3-4 billion, as the company is developing its own AI supercomputer and sensors. This revision in the investment plan could potentially impact Tesla's AI development timeline and strategy.

Photographer: Erik Mclean | Source: Unsplash

Potential Impacts

The redirection of AI processors, worth over $500 million, is likely to have a significant impact on Tesla's autonomous driving ambitions, potentially delaying their acquisition by several months. This move has also sparked investor concerns about Musk's priorities and potential conflicts of interest between his various business ventures, particularly in the context of Tesla's AI development.

Musk had previously stated he was 'uncomfortable' heavily investing in AI at Tesla without having around 25% voting control of the company. This statement was made in the context of his desire to have a significant influence on Tesla's strategic decisions related to AI. Tesla shareholders will vote on reinstating Musk's $56 billion pay package, which was struck down by a court, at their June 13th annual meeting.

In summary, Musk redirected crucial AI chips from Tesla to X and xAI due to logistical constraints at Tesla, despite previously committing to ramping up Tesla's AI capabilities. This move has sparked investor concerns over Musk's leadership focus and prioritization of his various companies.

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