Tesla acquires mysterious AI hardware start-up for $2B
What's the story
Tesla has disclosed its acquisition of a mysterious artificial intelligence (AI) hardware company for up to $2 billion. The deal was revealed in a recent securities filing, which stated that the transaction would be settled with Tesla common stock and equity awards. Of the total amount, around $1.8 billion is contingent on certain service conditions and/or performance milestones tied to the successful deployment of this company's technology.
Deal implications
Deal suggests acquisition of both product and team
The structure of the deal hints that Tesla might be looking to acquire both a product and a team. The heavy emphasis on performance milestones suggests that the target company could have promising but unproven technology. This also indicates that Tesla could be using stock incentives as a way to retain talent from this company.
Strategic alignment
SpaceX's alignment with AI and its IPO prospects
The acquisition comes as Elon Musk continues to align his companies with AI. SpaceX, which recently acquired xAI, is already betting big on the technology. Reuters reports that SpaceX's IPO filing estimates a $28.5 trillion total addressable market for the rocket company, with about $26.5 trillion coming from AI alone. Meanwhile, Tesla plans to increase its capital expenditures to around $25 billion this year, much of which will go toward AI initiatives.
Business impact
Tesla to stop production of Model S and Model X
Tesla's shift toward AI is also affecting its core business. The company plans to discontinue production of its Model S and Model X electric vehicles. Musk said on an earnings call, "We expect to wind down S and X production next quarter and basically stop production." He added that this decision is part of Tesla's overall shift toward an autonomous future.