Morgan Stanley’s Adam Jonas suggested Tesla’s shareholder proposal to invest in xAI represents strategic exploration rather than commitment, maintaining his bullish stance on the EV maker with an $800 price target ahead of the November 6 vote.

Morgan Stanley analyst Adam Jonas issued a new investor note today framing Tesla’s upcoming shareholder vote on investing in Elon Musk’s AI startup xAI as a calculated trial balloon, according to a screenshot shared by Tesla investor Sawyer Merritt. The longtime Tesla bull maintains his Overweight rating and $800 price target, arguing the proposal could pave the way for deeper collaboration between Musk’s electric vehicle and artificial intelligence empires without the regulatory complexity of an outright merger.

This analyst commentary arrives just nine days before Tesla shareholders vote on November 6 on whether to authorize the Board to invest in xAI—a proposal that has drawn intense scrutiny given Musk’s dual roles and xAI’s reported valuation. The timing matters: Tesla’s pivot toward AI and robotics comes as the company’s core automotive business faces headwinds and its trillion-dollar valuation hinges on autonomous driving promises.

Jonas Sees Strategic Benefits Despite Conflict Concerns

Jonas’s note emphasizes potential synergies between Tesla’s robotics program and xAI’s pursuit of artificial general intelligence (AGI).

“We think the proposal for Tesla’s investment in xAI deserves more attention. Among a range of possibilities, we believe the proposal may be a ‘testing of the waters’ for further investment/cooperation between Tesla and xAI down the road,” Jonas wrote, according to Merritt’s post on X. The Morgan Stanley analyst highlighted how “Tesla’s progress in robotics would benefit from xAI’s progress in AGI. Data sharing between the two ‘related parties’ (bi-directional) may ultimately benefit from closer cooperation over time from a legal perspective.”

This cooperation already exists in limited form—xAI’s Grok chatbot powers features in Tesla vehicles and serves as the “brain” for Optimus humanoid robots.

Jonas’s $800 bull case stands well above Tesla’s current trading levels, reflecting confidence that AI integration could offset weakness in the core automotive business. The analyst noted the investment proposal leaves the amount and structure entirely to Tesla’s Board discretion, a flexibility that could allow for measured initial investment rather than massive capital commitment.

Shareholder Proposal Leaves Board Full Discretion

The investment proposal heading to a vote comes from Stephen Hawk, a 56-year-old Florida Tesla investor holding just $2,000 in common stock. Proposal Seven in Tesla’s proxy statement requests that shareholders “authorize an investment in xAI, in an amount and form deemed appropriate by the Board,” according to TechCrunch’s review of the proxy materials.

Hawk’s supporting statement argues that “Tesla’s integration of Grok into its vehicles demonstrates the tangible benefits of collaboration with xAI. As Tesla pivots toward AI-driven technologies, including Full Self-Driving and robotics, a strategic investment in xAI would secure access to advanced AI capabilities, enhance product innovation, and drive shareholder value,” TechCrunch reported.

Notably, Tesla’s Board has taken a neutral position on this proposal—the only shareholder proposal where the Board hasn’t recommended a vote against, according to TechCrunch. Musk posted on X in July that “if it was up to me, Tesla would have invested in xAI long ago,” making clear his personal preference while deferring to the shareholder vote due to conflict-of-interest concerns.

xAI’s Financial Reality Complicates Investment Case

The financial reality behind this proposal presents significant risks. CNBC reported in September 2025 that xAI was raising $10 billion at a roughly $200 billion valuation, though Musk publicly denied the company was raising funds “right now,” creating uncertainty around xAI’s current financial position. Industry analysts estimate xAI burns through $10-13 billion annually as it races to compete with OpenAI, Google, and other AI leaders, according to market research reports.

Analysis from Electrek notes that xAI has an estimated 30 million weekly users compared to OpenAI’s reported 700-800 million, suggesting Tesla would be investing at a premium valuation for a distant competitor in the AI race. The company raised $10 billion in a mixed equity-and-debt round earlier in 2025, with TechCrunch reporting that SpaceX contributed $2 billion as part of that funding.

Gene Munster of Deepwater Asset Management told TechCrunch that “Tesla’s not going to get to $8 trillion market cap based on FSD and robotaxi. To get to that $8 trillion, you kind of need xAI,” framing the investment as essential to Musk’s audacious compensation plan that requires creating $7.5 trillion in shareholder value.

Proposal Comes Amid Challenging Automotive Fundamentals

Tesla’s push for xAI investment coincides with significant challenges in its core automotive business. Reports indicate vehicle sales faced pressure in the first half of 2025 as the company grappled with an aging product lineup and brand concerns stemming from Musk’s political controversies. The company has already integrated Grok into vehicles via software update 2025.26 and deployed the AI for automated insurance support.

The company’s robotaxi pilot launched in Austin with limited deployment, though regulatory delays persist in California and other major markets. Musk has repeatedly positioned Tesla as an AI and robotics company rather than an automaker, with the Optimus humanoid robot taking center stage in earnings calls. Jonas himself moved into a new AI-focused role at Morgan Stanley in August 2025, according to CNBC, signaling Wall Street’s recognition that Tesla’s valuation increasingly depends on AI rather than vehicle sales.

EVXL’s Take

This analyst note crystallizes a question Tesla shareholders have debated since Musk founded xAI in 2023: Is closer integration between these companies good for Tesla investors, or does it represent Musk using shareholder capital to bail out his private AI venture?

Jonas frames this as “testing the waters” rather than commitment, which is probably the right read. A full Tesla-xAI merger would trigger massive regulatory scrutiny and governance battles. But a strategic investment—say, $5-10 billion—could formalize the collaboration that already exists through Grok’s integration into Tesla vehicles et Optimus robots without the complexity of a merger.

The problem is xAI’s economics. Burning an estimated $10-13 billion annually with approximately 30 million weekly users isn’t sustainable without continuous capital injections. If Tesla invests at a premium valuation and xAI fails to catch OpenAI, shareholders will have funded Musk’s AI ambitions while getting diluted on any upside if xAI somehow succeeds. That’s a heads-Musk-wins, tails-shareholders-lose proposition.

The Board’s neutral stance—unusual given they recommended against all other shareholder proposals—suggests internal division or strategic ambiguity about how tightly to bind these companies. Some analysts view this neutrality as tacit support, though the Board hasn’t explicitly endorsed the proposal.

Still, there’s logic to the robotics synergy argument. Tesla’s Optimus development needs cutting-edge AI, and xAI’s compute infrastructure could accelerate both robotics and Full Self-Driving. The robotaxi rollout remains plagued by regulatory delays, but better AI could help Tesla finally deliver on autonomous promises that date back to 2016.

Our sister site DroneXL has extensively covered how AI transforms autonomous systems—from Ukrainian battlefield drones facing hardware limits to agricultural robots revolutionizing harvesting. The lesson from those applications: AI is powerful when tightly integrated with hardware, but autonomous systems remain years from replacing human oversight despite marketing hype. Tesla and xAI face the same challenge at scale.

The November 6 vote will reveal whether shareholders buy Musk’s vision that combining Tesla and xAI creates an AI powerhouse worth trillions—or whether they see this as throwing good money after bad as the core EV business struggles. Jonas’s bullish note provides cover for yes votes, but proxy advisors ISS and Glass Lewis have already recommended voting against Musk’s separate $1 trillion pay package, suggesting institutional skepticism about governance at Musk-controlled companies.

What do you think? Should Tesla invest in xAI? If yes, what investment cap makes sense? Share your thoughts in the comments below.