Elon Musk announced his new company xAI and said it has the goal of understanding the nature of the universe.
Jaap Ariens | Nurfoto | Getty Images
tesla The company sold $430 million worth of giant backup batteries, called Megapacks, to Elon Musk’s artificial intelligence startup xAI in 2025, according to a filing Thursday.
Sales to xAI account for about 3.4% of Tesla’s energy revenue, which rose 27% to $12.8 billion last year from $10.1 billion in 2024, according to the filing.
Tesla’s energy division, which sells solar power and battery storage systems of various sizes, was a bright spot for the company as its auto revenue fell 10% to $69.5 billion, weighed down by declining brand reputation and an aging lineup.
Total annual sales fell by about 3%, the first decline on record, as cars remain Tesla’s main source of revenue.
Musk first incorporated xAI in March 2023 and publicly revealed its existence four months later, calling it a politically incorrect competitor to OpenAI. Musk co-founded OpenAI as an AI lab in 2015 and left in 2018, several years before the company released ChatGPT. Both sides are currently engaged in a bitter legal battle, with a trial scheduled to begin in April.
During Wednesday’s fourth-quarter earnings call, Tesla announced it would invest $2 billion in xAI as part of the startup’s latest funding round.
Tesla’s investment comes after the publication of numerous studies around the world into xAI’s Grok chatbot and image generator. This enabled widespread non-consensual creation and distribution of explicit deepfake images.
Earlier this month, xAI announced that it had raised $20 billion from a number of investors in its latest funding round. Nvidia and Cisco. Reuters reported on Thursday that SpaceX is considering a merger with xAI ahead of Musk’s aerospace and defense company’s planned IPO.
XAI previously announced that it is using Tesla Megapacks to power its data infrastructure in and around Memphis, Tennessee, where it has a data center called Colossus.
Megapacks are used for business and utility-scale development, and Tesla’s new Megablock combines four Megapacks around one transformer. The system uses lithium-ion or other battery cells to avoid power outages in data centers and public facilities and enables energy storage from sources such as solar and wind.
In 2025, xAI installed and was using 35 natural gas-burning turbines to power the operations of the Colossus facility, according to aerial video obtained by the Southern Environmental Law Center. Exhaust fumes from the turbines caused a local uproar, with residents complaining of bad odors, health problems and an inability to keep their home windows open.
The Environmental Protection Agency recently updated its rules for the use of such turbines to clarify that they are not exempt from Clean Air Act permit requirements.
An ongoing lawsuit in Delaware accuses Musk of diverting the automaker’s resources to xAI and breaching his fiduciary duty to Tesla shareholders.
Spotlight: Musk’s xAI closes $20 billion funding round
