US Defence Official's xAI Stock Sale Nets Millions Amid Pentagon Deals
Emil Michael, a high-ranking US defence department official responsible for artificial intelligence initiatives, reportedly earned a profit of up to $24 million from selling his investment in Elon Musk's xAI earlier this year. This transaction occurred shortly after the Pentagon, now referred to as the Department of War, entered into agreements with the company, sparking scrutiny over potential conflicts of interest.
Financial Disclosures Reveal Substantial Gains
According to government ethics records released this month, Michael declared in March 2025 that he held a position in xAI valued between $500,000 and $1 million. He sold these holdings on 9 January 2025 for an amount ranging from $5 million to $25 million, as disclosed to the Office of Government Ethics. This represents a gain of between 400% and 4,800% on his initial investment.
Michael, who serves as the under secretary for research and engineering under the Trump administration, oversees negotiations with AI firms and advocates for the rapid integration of AI across the defence department. His stake in xAI was held through a company called KQ Partners, though the exact details of how he acquired or priced the shares remain unclear, as xAI is not publicly traded.
Timing of Sales and Pentagon Agreements
During the period Michael owned the xAI stock, the Pentagon announced two separate agreements with the company. In July 2025, Grok, xAI's chatbot, was selected as one of four commercial providers to assist the department in utilising artificial intelligence. Then, on 22 December 2025, the Department of War announced a new agreement with xAI to deploy advanced AI capabilities on GenAI.mil.
Notably, Michael received a divestiture certificate from the OGE on 18 December 2025, indicating he would sell his xAI stock to comply with conflict of interest laws. However, he did not complete the sale until 9 January 2025, four days after the December agreement was announced.
Ethics Concerns and Legal Implications
Richard Painter, a former White House ethics lawyer under President George W. Bush, highlighted that federal law prohibits government officials from participating in actions that benefit their financial interests. He described Michael's transactions as "pretty weird" and suggested that holding AI stock while involved in AI matters could violate criminal statutes.
The Pentagon, in a statement attributed to spokesperson Sean Parnell, defended Michael, stating that the department maintains a rigorous ethics framework and that Michael is in full compliance with all laws and regulations. The statement emphasised that any claims to the contrary are false.
Background and Broader Context
Michael was sworn in as under secretary of defence for research and engineering in May 2025. He has been a prominent figure in the Pentagon's public disputes, such as a recent conflict with AI contractor Anthropic over technology use. His role has included personal insults on X targeting company CEOs, which is considered unusual for a defence official.
His appointment comes as US Secretary of Defence Pete Hegseth promotes AI in the military, with initiatives like posters urging personnel to use AI. Michael's career includes a stint as chief business officer at Uber, and he is known to have social ties with Elon Musk. Musk's xAI, launched in 2023, has faced controversy over issues like sexualised deepfakes involving its Grok chatbot.
At an event at Musk's Stargate facility in Texas, just three days after Michael sold his xAI holdings, Hegseth publicly acknowledged Michael, calling him the department's chief technology officer. This further underscores the close ties between the defence establishment and private AI ventures.
