Tesla just disclosed a $430 million related-party transaction that's raising eyebrows across corporate governance circles. The electric vehicle maker sold a massive tranche of its Megapack energy storage systems to xAI, Elon Musk's AI startup, throughout 2025, according to the company's annual SEC filing released Thursday. The deal - representing 3.4% of Tesla's $12.8 billion energy division revenue - comes as Musk faces mounting scrutiny over potential conflicts of interest across his interlocking business empire.
Tesla buried a bombshell in its latest regulatory paperwork. The company's annual 10-K filing revealed that xAI - Elon Musk's 22-month-old AI venture - purchased $430 million worth of Tesla's industrial-scale Megapack battery systems throughout 2025. The timing couldn't be more awkward. Just one day earlier, Tesla announced it's pumping $2 billion into xAI's latest funding round.
The battery deal represents a significant chunk of Tesla's energy business, which has become the automaker's unexpected bright spot. While Tesla's core automotive revenue slumped 10% to $69.5 billion last year - dragged down by an aging product lineup and brand reputation challenges - the energy storage division posted a robust 27% gain, climbing from $10.1 billion in 2024 to $12.8 billion in 2025. It's the first time Tesla's overall revenue has declined since the company went public.
XAI needs those batteries to power Colossus, its massive data center operation sprawling across Memphis, Tennessee. The facility is central to xAI's ambitions to challenge OpenAI, the company Musk co-founded in 2015 before departing in 2018. The two are now locked in heated litigation, with a trial scheduled for April. Musk launched xAI in March 2023, positioning it as what he called a "politically incorrect" alternative to ChatGPT.
Tesla's Megapacks are industrial workhorses - each unit stores enough lithium-ion battery capacity to power thousands of homes, and the newer Megablocks stack four Megapacks around a single transformer. For data centers burning through electricity to train AI models, they're essential backup infrastructure, storing energy from solar and wind sources while preventing blackouts during peak demand.
