By Emil Michael, the Pentagon’s under secretary for research and engineering, is facing scrutiny after making up to $24 million selling private shares in Elon Musk’s AI company, xAI.
According to government ethics records, Michael held the stock while actively pushing for the widespread adoption of AI within the Defense Department—which now refers to itself as the Department of War. The massive profit, coupled with overlapping government contracts awarded to xAI, has raised significant conflict-of-interest questions.
The Financial Gain Because xAI is not publicly traded, exactly how Michael obtained or priced his shares remains unclear. However, government financial disclosures reveal a massive return on investment:
- Initial Value: When Michael declared his position in March 2025, his xAI holdings were valued between $500,000 and $1 million.
- Sale Value: He sold the shares on January 9, 2026, for between $5 million and $25 million (a gain of 400% to 4,800%).
Timeline of Events The controversy stems from the timeline of the Pentagon’s agreements with xAI while Michael still owned his shares:
- July 2025: The Pentagon selected xAI’s “Grok” as one of four commercial providers to help the department utilize AI.
- December 18, 2025: Michael received a divestiture certificate from the Office of Government Ethics (OGE), instructing him to sell his stock to comply with conflict-of-interest laws.
- December 22, 2025: Four days later, the Department of War announced a new, official agreement with xAI to deploy advanced capabilities on GenAI.mil.
- January 9, 2026: Michael officially sold his position in xAI.
Ethics Concerns vs. Official Response
- The Critics: Richard Painter, a former White House ethics lawyer under George W. Bush, called the transactions “pretty weird.” He noted that federal law prohibits officials from participating in government actions that benefit their own financial interests, stating: “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.”
- The Defense: The Department of War denied any wrongdoing. Spokesperson Sean Parnell stated that the department maintains a rigorous ethics framework and that Michael was “in full compliance with all ethics laws and regulations. Any claims otherwise are false.”
Background & Context
Ties to Musk: Michael, a former executive at Uber, reportedly knows Elon Musk socially. Musk previously supported Michael for the role of Secretary of Transportation before Trump appointed him to the Pentagon in May 2025.
Push for AI: Defense Secretary Pete Hegseth is a vocal proponent of military AI, recently praising Michael as the department’s single chief technology officer during an event at Musk’s Texas Stargate facility.
Public Feuds: Michael’s tenure has been unusually aggressive. Recently, he became the face of a public dispute with AI contractor Anthropic—after they refused to allow their tech to be used for autonomous killing or domestic surveillance—resorting to personal insults on X, calling the Anthropic CEO a “liar” with a “God-complex.”