Tesla sold $430 million worth of its Megapack backup batteries to Musk's xAI in 2025

Tesla has made headlines with its substantial $430 million sale of Megapack backup batteries to xAI, Elon Musk's artificial intelligence venture, as revealed in a recent filing. This transaction represents roughly 3.4% of Tesla's energy revenue, which saw a remarkable increase of 27% last year, climbing to $12.8 billion from $10.1 billion in 2024. While Tesla's energy division, which encompasses solar photovoltaics and battery storage solutions, shines brightly, the automotive sector faced challenges. Auto revenue took a significant hit, dropping 10% to $69.5 billion due to a tarnished brand reputation and an aging vehicle lineup. As a result, total sales for the company fell approximately 3% for the year, marking the first recorded decline in Tesla's history. Elon Musk launched xAI in March 2023, unveiling it publicly a few months later. He positioned it as a politically incorrect rival to OpenAI, a company Musk co-founded in 2015 before stepping away in 2018, well before the release of ChatGPT. Currently, the two organizations are embroiled in intense legal disputes, with a trial anticipated to commence in April. In a recent earnings report, Tesla disclosed a $2 billion investment in xAI as part of the startup's latest funding round. This investment comes amid global investigations into xAI's Grok chatbot and image generation technology, which has faced criticism for enabling the unauthorized creation and distribution of explicit deepfake content. Earlier this month, xAI announced it had secured $20 billion in its latest funding round, attracting interest from major investors like Nvidia and Cisco. Additionally, reports have emerged that SpaceX is contemplating a merger with xAI in light of a planned initial public offering for Musk's aerospace company. xAI has been utilizing Tesla Megapacks to power its data infrastructure near Memphis, Tennessee, where its Colossus data center is located. Megapacks are designed for large-scale utility and business applications, and Tesla's latest Megablocks consist of four Megapacks combined with a transformer, employing lithium-ion batteries to help maintain power during outages by storing energy from renewable sources like solar and wind. In 2025, it was reported that xAI was operating 35 natural gas turbines to support its Colossus facility. However, emissions from these turbines have sparked community complaints regarding odors, health concerns, and the inability to keep windows open. The Environmental Protection Agency has recently clarified that these turbines require Clean Air Act permits, further complicating the situation. Musk is currently facing a lawsuit in Delaware, accused of breaching his fiduciary duties to Tesla shareholders by allegedly redirecting company resources toward xAI.