- Elon Musk recently admitted at X that he had delayed shipments of thousands of Nvidia chips to Tesla.
- Musk also hopes Tesla investors will vote to reinstate his huge stock option package.
- Several Tesla shareholders who have spoken out against the compensation package argue he still doesn't deserve it.
Several institutional investors in Tesla told Business Insider that Elon Musk's decision to redirect shipments of expensive Nvidia chips from the EV company is further evidence that the CEO doesn't deserve his multibillion-dollar compensation package.
In May, a group of eight Tesla shareholders wrote a letter urging other investors to vote against Musk's compensation package, just one of a growing number of investors who have said they plan to vote against the proposed acquisition.
The proposed deal, now worth roughly $46 billion, was rejected in January by Delaware Chancery Court Chief Justice Katherine McCormick, who said the process used to arrive at an “unfair price” for Musk was “deeply flawed.”
Tesla shareholders are scheduled to vote on June 13 on whether to reinstate Musk's contract.
But less than two weeks before the shareholder vote, CNBC reported that Musk had diverted a $500 million shipment of Nvidia chips, which are crucial for powering artificial intelligence technology, from Tesla to his own social media platform, X.
CNBC reported that an internal Nvidia memo showing Musk delaying sourcing Nvidia chips was dated December, months before Tesla's April earnings call in which the CEO claimed the carmaker was an AI company. He also said in the call that he was aggressively increasing the number of Nvidia chips at Tesla from 35,000 to 85,000 by the end of 2024.
“Tesla didn't have a place to send Nvidia's chips and power them up, so the chips would have just been sitting in a warehouse,” Musk said on X, as reported by CNBC.
“The south side expansion of Giga Texas is almost complete, where we'll have 50,000 H100 (Nvidia chips) for FSD training,” Musk added, referring to Tesla's full self-driving capability — a key component of the company's promise to make self-driving taxis a reality.
But some of the shareholders behind the effort to block Musk's big paycheck aren't convinced.
“The repurposing of Nvidia processors for X and xAI is just another example of how poor oversight by Tesla's board of directors has led Tesla's CEO to allocate Tesla's resources to other businesses and treat Tesla like his own personal safe deposit box,” Tejal Patel, executive director at SOC Investment Group, said in an email to BI.
Patel added, “The key question is why these valuable processors were 'just sitting there' in the first place and, if it was an operational issue, why couldn't management have foreseen it? Whatever decision Tesla made about not using the processors, it would have been up to CEO Musk.”
Musk did not respond to Business Insider's request for comment.
SOC Investment Group was one of eight shareholders who co-signed a letter urging investors to approve Musk's stock option package and vote against the re-election of Musk's brother Kimbal and James Murdoch to Tesla's board of directors.
The group, made up of pension fund managers, asset managers and banks, also includes Amalgamated Bank, Akademikarpension, Nordea Asset Management, New York City Comptroller Brad Lander, Scheer, Unison and United Church Fund.
Musk's decision to repurpose Nvidia chips from Tesla “should raise red flags for investors,” Lander wrote in a statement to BI.
“This sudden move adds to growing concerns about Musk's commitment to Tesla and highlights his apparent conflict of interest,” he wrote. “Tesla urgently needs a truly independent board of directors that will ensure Musk puts the company's interests first.”
Matthew Illian, director of responsible investing at United Church Funds, similarly criticized Musk for delaying Nvidia chip shipments, calling it “further evidence” that the compensation package “never achieved its objective of keeping Tesla's CEO interested.”
“This is all a way for Elon to build his own empire with investor money and we cannot allow this to happen,” he said in an email to BI.
It was not immediately clear how much Tesla stock the eight shareholders collectively own.
Five of the eight shareholders, including Amalgamated Bank, Unison Bank, Nordea Bank, New York City Retirement Fund and the United Church Fund, own more than 4.9 million Tesla shares.
As of Thursday, those shares were valued at more than $878 million.
Spokespeople for SHARE, Nordea and Unison could not be reached for comment but did not respond to requests for comment.
In addition to the eight shareholders, the California Public Employees' Retirement System (CalPERS), which owns about 9.5 million Tesla shares, has also indicated it intends to vote against Musk's compensation package.
CalPERS CEO Marcy Frost told CNBC, “We believe compensation is not commensurate with the company's performance.”
A CalPERS spokesman declined to comment when asked about Musk's decision to redirect Nvidia chip shipments.
