Tesla shareholders sue Musk for building a rival AI company

Tesla shareholders have sued CEO Elon Musk and board members, alleging Musk diverted resources to his new AI company, xAI.

Filed in Delaware Chancery Court, the lawsuit claims Musk breached his fiduciary duties and violated Tesla's business ethics by using Tesla talent and assets for xAI.

The suit was filed just before Tesla's annual meeting, where shareholders were set to vote on re-ratifying Musk's $56 billion compensation package. Plaintiffs demand Musk hand over his stake in xAI to Tesla.

The complaint highlights that at least 11 Tesla employees joined xAI and that Musk redirected a shipment of Nvidia AI processors from Tesla to his social media company, X. Musk admitted the diversion, citing construction delays at Tesla's Texas data center.

Earlier this week, another lawsuit accused Musk of making billions through insider trading of Tesla stock in 2021 and 2022.