Pentagon AI Official Reaped Millions from xAI Stock Sale After Defense Department Agreements
Emil Michael, the US Department of Defense's under secretary for research and engineering, made a substantial profit of up to $24 million by selling his private investment in Elon Musk's artificial intelligence company, xAI, earlier this year. This transaction occurred after the Pentagon entered into multiple agreements with the same AI firm, according to recently released government ethics records.
Financial Disclosure Reveals Significant Gains
Michael declared in March 2025 that he held a position in xAI valued between $500,000 and $1 million. By January 9, he had sold those holdings for an amount ranging from $5 million to $25 million, as documented in disclosures filed with the Office of Government Ethics. The investment was held through a company called KQ Partners, and the sale represented a gain of between 400% and 4,800% on his initial stake.
Government financial disclosure reports typically show ranges rather than precise amounts, making the exact figures uncertain. xAI, the company behind Musk's Grok chatbot, remains privately traded, leaving questions about how Michael obtained his position, how it was priced, and to whom he ultimately sold the shares.
Timing Raises Ethical Questions
During the period Michael owned xAI stock, the Pentagon announced two separate agreements with the company. In July 2025, the defense department selected Grok as one of four commercial providers to help utilize artificial intelligence across military operations. Then, on December 22, the Department of War—as it now refers to itself—announced a new agreement with xAI to deploy advanced capabilities on GenAI.mil.
Michael received a divestiture certificate from the OGE on December 18, indicating he would sell his xAI stock to comply with conflict of interest laws. However, he did not complete the sale until January 9, four days after the second Pentagon agreement with xAI was announced.
Experts Highlight Potential Legal Violations
Richard Painter, a former White House ethics lawyer under President George W. Bush, emphasized that federal law generally prohibits government officials from participating in actions that benefit their own financial interests. "It sounds pretty weird," Painter commented regarding the transactions. "There is no way that a decent ethics lawyer would let a defense department official hold on to AI stock while he's involved in AI matters. You would have a very high chance of violating the criminal statute."
The Pentagon did not respond to detailed questions but issued a statement attributed to spokesperson Sean Parnell: "The Department of War maintains a rigorous, multi-layered ethics framework that includes financial disclosure reviews, divestitures where appropriate, and screening to prevent conflicts of interest." The statement asserted that Michael was "in full compliance with all ethics laws and regulations. Any claims otherwise are false."
Background and Controversial Conduct
Michael was sworn in as under secretary of defense for research and engineering in May 2025. In recent months, he became the public face of the Pentagon's dispute with AI contractor Anthropic, which insisted its technology could not be used for domestic surveillance or autonomous killing. In what many consider unusual conduct for a defense official, Michael posted personal insults on X targeting Anthropic's CEO, calling him a "liar" with a "God-complex."
His role overseeing AI acquisition coincides with Secretary of Defense Pete Hegseth's aggressive promotion of AI in military applications. Pentagon halls have been adorned with posters echoing iconic World War II recruitment imagery, urging personnel to embrace artificial intelligence.
Connections to Musk and Business History
Before his nomination by the Trump administration, Michael had a prominent business career, including serving as chief business officer at Uber. It has been widely reported that he knows Elon Musk socially. In 2024, Michael was considered for Trump's secretary of transportation, with Musk tweeting approval that he "would be effective" in the role, though Trump ultimately selected another candidate.
Musk launched xAI in 2023, securing billions in funding from major equity firms and the Qatar Investment Authority. The company's Grok chatbot has faced controversy over sexualized deepfakes.
Notably, just three days after Michael sold his xAI holdings, Hegseth spoke at Musk's Stargate facility in Texas, publicly acknowledging Michael in the audience: "Our under secretary of war for research and engineering, Emil Michael, right here in the front row, is the war department's single chief technology officer. One CTO for the entire enterprise."
