Elon Musk confirmed Tuesday that Tesla and xAI will keep buying chips from major semiconductor companies Nvidia and AMD as demand for AI hardware accelerates.
Musk said that Tesla and his AI company xAI have no plans to merge, but both will continue collaborating and expanding chip purchases. Musk revealed that xAI already has 200,000 GPUs installed at its Colossus supercomputing facility in Memphis, Tennessee.
He said xAI plans to build a new 1 million GPU facility outside Memphis to scale its training capabilities further. Musk called the current Colossus cluster “the most powerful training cluster in the world” and said it was training “over 200,000 GPUs coherently.”
Musk did not specify the total chip order volumes or delivery timelines. However, he reiterated that chips remain the key constraint for AI development. “A few years ago, I made a very obvious prediction, which is that the limitation on AI will be chips,” he said.
In 2023, Musk prioritized chip delivery to xAI ahead of Tesla, raising questions about internal competition between his ventures. Still, Tesla and xAI will keep buying chips from both Nvidia and AMD to support their respective AI workloads.
Tesla’s Dojo supercomputer, located in Buffalo, New York, is already training systems for Autopilot and the Optimus humanoid robot. Meanwhile, xAI’s expansion aims to transform Memphis into a “high-tech manufacturing hub,” according to local leaders.
Not all reactions have been positive. Environmental groups criticized xAI’s use of natural gas-burning turbines to power Colossus. They claim the company violated the Clean Air Act due to nitrogen oxide emissions, which contribute to respiratory health risks.
Musk also warned of future bottlenecks. He predicted that by mid-2026, electricity—not chips—will become the main constraint on AI. “There will be a fundamental electricity generation shortage,” he said.
Despite increasing AI investment from China, Musk said the U.S. still leads in innovation. “You must question authority to make breakthroughs,” he added, contrasting U.S. and Chinese innovation cultures.
When asked about merging Tesla and xAI, Musk said it’s not planned but “not out of the question” if Tesla shareholders approve. The two companies already collaborate. xAI purchased $191 million in Tesla Megapacks in 2024 and another $36.8 million through early 2025.
As Musk expands both ventures, Tesla and xAI will keep buying chips to fuel their next wave of AI development.
For more business updates, visit DC Brief.
