Musk's $430M Battery Deal Exposes the Inner Workings of His Business Empire

$430 million. That's how much Tesla sold to xAI, Elon Musk's AI startup, in battery systems last year. The figure, buried in Tesla's annual filing Thursday, represents 3.4% of the company's energy business revenue and offers a rare glimpse into the financial flows within Musk's sprawling business empire.

While Tesla's core auto business stumbled with a 10% revenue decline to $69.5 billion, the energy division surged 27% to $12.8 billion. The xAI sales helped fuel that growth, even as Tesla recorded its first-ever annual revenue decline of roughly 3%.

The Megapack Pipeline to Memphis

xAI has been building its "Colossus" data center in and around Memphis, Tennessee, powered partly by Tesla's industrial-scale Megapack batteries. These systems, designed for utilities and large businesses, store energy from renewable sources and prevent blackouts—critical infrastructure for the energy-hungry world of AI computing.

But the Memphis facility tells a more complex story. Alongside Tesla's clean energy storage, xAI installed 35 natural gas-burning turbines in 2025, drawing community complaints about stench, health problems, and air quality. The Environmental Protection Agency recently clarified that such turbines require Clean Air Act permits, adding regulatory pressure to the operation.

The juxtaposition is striking: Tesla, a company built on sustainable energy principles, selling batteries to power a facility that relies heavily on fossil fuels.

The $20 Billion Question

Musk's dual role as Tesla CEO and xAI founder has sparked legal challenges. A pending Delaware lawsuit accuses him of violating his fiduciary duty to Tesla shareholders by diverting company resources to xAI. The timing of these revelations is particularly sensitive, coming just after Tesla announced a $2 billion investment in xAI's latest funding round.

xAI raised $20 billion total in that round from investors including Nvidia and Cisco, valuing the 2023 startup at astronomical levels. The company positions itself as a "politically incorrect" competitor to OpenAI, Musk's former venture that he co-founded in 2015 before leaving in 2018. The two sides now face off in court, with a trial scheduled for April.

Meanwhile, SpaceX is reportedly considering a merger with xAI ahead of a planned IPO, further complicating the web of Musk's business relationships.

The Broader Energy Storage Play

Beyond the Musk empire dynamics, the xAI deal highlights Tesla's growing energy storage ambitions. The company's newer Megablocks—combinations of four Megapacks around one transformer—represent a significant revenue opportunity as data centers proliferate globally.

With AI companies racing to build computing infrastructure, energy storage has become a critical bottleneck. Tesla's position as both an EV company and energy storage provider gives it unique advantages, but also unique conflicts when its CEO controls multiple players in the ecosystem.