Pentagon AI Official Made Millions on xAI Stock While Overseeing Defense Deals With Company
Emil Michael, the Pentagon's under secretary for research and engineering, sold a private investment in Elon Musk's AI company xAI for between $5m and $25m in January 2025, according to government ethics disclosures. His stake, valued at no more than $1m when he joined the department in May 2024, generated a gain of between 400% and 4,800%.
Michael oversees the Defense Department's negotiations with AI companies and has pushed for rapid expansion of AI use across the military. During the months he held xAI stock, the Pentagon announced two separate agreements with the company-one in July 2024 selecting Grok as a commercial AI provider, and another on December 22, 2024, entering into a formal partnership with xAI.
The timing raises questions about potential conflicts of interest. Michael received a divestiture certificate from the Office of Government Ethics on December 18, 2024, instructing him to sell his xAI holdings to comply with conflict of interest laws. He did not complete the sale until January 9, 2025-three weeks later and four days after the Pentagon announced its major agreement with xAI.
xAI is not publicly traded, leaving unclear how Michael obtained his position, at what price, or to whom he sold it.
What Federal Law Says
Federal law prohibits government officials from taking actions in their jobs that benefit their own financial interests. Richard Painter, a former White House ethics lawyer under President George W. Bush, said the arrangement appears problematic.
"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," Painter said. "You would have a very high chance of violating the criminal statute."
The Pentagon declined to answer detailed questions but said in a statement that Michael was "in full compliance with all ethics laws and regulations. Any claims otherwise are false."
Michael's Role in Pentagon AI Strategy
Michael has become the public face of the Defense Department's AI push. Secretary of Defense Pete Hegseth has made AI adoption a priority, and Michael oversees the strategy across the military's 3 million military and civilian personnel.
In recent months, Michael has engaged in public disputes with AI contractor Anthropic over the company's refusal to allow its technology to be used for domestic surveillance or autonomous weapons. Michael posted personal insults on X targeting the company's CEO, calling him a "liar" with a "God-complex"-conduct that would be considered unusual for a defense official in most administrations.
Michael's background includes a stint as chief business officer at Uber. It has been widely reported that he knows Musk socially. Before his nomination to the under secretary role, his name circulated as a potential secretary of transportation, and Musk tweeted approval of that prospect, though Trump selected someone else.
When Hegseth spoke at Musk's Stargate facility in Texas three days after Michael sold his xAI holdings, he singled out the under secretary sitting in the front row, calling him "the war department's single chief technology officer."
For government officials overseeing AI adoption and policy, understanding the ethical and legal frameworks governing financial conflicts is essential. Learn more about AI for Government and how these principles apply to federal AI strategy.
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