Pentagon Official's Profitable Stake in Elon Musk's AI Company Raises Ethical Concerns

Emil Michael, the Pentagon's under secretary for research and engineering, reportedly profited between $5 million and $25 million from the sale of his stake in Elon Musk's AI company, xAI, earlier this year. This financial gain has raised significant ethical questions regarding potential conflicts of interest, particularly given Michael's role in overseeing AI initiatives within the Department of War.

The Guardian

Michael joined the Pentagon in May 2025, overseeing negotiations with AI companies and advocating for the rapid integration of artificial intelligence in defense operations. His financial disclosures indicate that he held a position in xAI valued between $500,000 and $1 million when he began his tenure. During his ownership of xAI shares, the Pentagon entered into two agreements with the company, including a notable contract in December 2025, shortly before Michael sold his holdings.

The Guardian

Emil Michael has a background in business, previously serving as chief business officer at Uber. His connections to Musk are notable, as he has been mentioned in discussions about potential roles within the Trump administration. Michael's recent conduct, including personal attacks on the CEO of AI contractor Anthropic, has drawn attention to his approach to managing relationships within the defense sector.

The Guardian

The Pentagon has defended Michael's actions, asserting that he is in full compliance with ethics laws. Sean Parnell, a spokesperson for the Department of War, stated, “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.” However, critics, including former ethics lawyer Richard Painter, have expressed skepticism about the propriety of Michael holding stock in an AI company while involved in related government contracts.

The Guardian

Critics have raised concerns about the legality of Michael's financial dealings, suggesting that federal law prohibits government officials from engaging in actions that could benefit their financial interests. Painter remarked, “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.” This sentiment underscores the tension between Michael's financial interests and his official responsibilities.

The Guardian

While Michael's financial disclosures indicate a substantial profit from his xAI holdings, the specifics of how he acquired the stock and the details of its sale remain unclear. xAI is not publicly traded, complicating transparency regarding the valuation and transaction process. The Pentagon has not provided detailed responses to inquiries about these transactions.

The Guardian

• “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.” — Richard Painter, Former Ethics Lawyer

The Guardian

• “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.” — Sean Parnell, Pentagon Spokesperson

The Guardian

• “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.” — Pete Hegseth, U.S. Secretary of Defense

The Guardian

The situation surrounding Emil Michael's financial dealings with xAI highlights ongoing concerns about ethics and accountability within the U.S. defense sector, particularly as the military increasingly integrates artificial intelligence technologies.

The Guardian