Tesla sold $430 million worth of its giant backup batteries called Megapacks to xAI, Elon Musk’s artificial intelligence startup, in 2025, according to a filing on Thursday.

The sales to xAI accounted for around 3.4% of Tesla’s energy business revenue, which climbed 27% to $12.8 billion last year from $10.1 billion in 2024, the filing said.

Tesla’s energy division, which sells solar photovoltaics and battery storage systems of various sizes, was a bright spot for the company, as auto revenue dropped 10% to $69.5 billion, weighed down by a tarnished brand reputation and an aging lineup.

Because autos remain Tesla’s predominant source of revenue, total sales fell roughly 3% for the year, declining for the first time on record.

Musk first incorporated xAI in March 2023, and revealed its existence publicly four months later, describing it as a politically incorrect competitor to OpenAI. Musk co-founded OpenAI as an AI lab in 2015, and left in 2018, years before the company released ChatGPT. The two sides are now involved in heated litigation, with a trial expected to begin in April.

In its fourth-quarter earnings release on Wednesday, Tesla said it was investing $2 billion in xAI as part of the startup’s latest round of funding.

Tesla’s investment came after the announcement of a number of investigations across the globe into xAI’s Grok chatbot and image generator, which enabled the widespread nonconsensual creation and distribution of explicit deepfake images

Earlier this month, xAI said that it raised $20 billion in its recent funding round from a number of investors, including Nvidia and Cisco. Reuters reported on Thursday that SpaceX is weighing a merger with xAI ahead of a planned IPO for Musk’s aerospace and defense company

XAI previously announced it was using Tesla Megapacks to help power its data infrastructure in and around Memphis, Tennessee, home to its data center called Colossus.

Megapacks are used for business and utility-scale developments, and Tesla’s newer Megablocks are a combination of four Megapacks around one transformer. The systems use lithium-ion or other battery cells, helping data centers and utilities avoid blackouts, allowing for energy storage from sources like solar and wind.

In 2025, xAI installed and was using 35 natural gas-burning turbines to power operations at the Colossus facility, according to aerial video obtained by the Southern Environmental Law Center. Emissions from the turbines led to community uproar, with residents complaining of a stench, health problems and an inability to keep their windows open at home.

The Environmental Protection Agency recently updated a rule concerning the use of such turbines, making clear that they are not exempt from the need for Clean Air Act permits.

In a lawsuit that’s pending in Delaware, Musk has been accused of violating his fiduciary duty to Tesla shareholders by diverting the automaker’s resources to xAI.

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