Elon Musk’s budget-cutter-in-chief role for Trump is a ‘dangerous combination’ that risks creating conflicts of interest with his AI empire

Musk’s planned role collides with his day job running his business empire that includes electric automaker Tesla, rocket company SpaceX, social media platform X, and AI startup xAI. Many worry he will use his position in Trump’s inner circle, leading the Department of Government Efficiency (DOGE), to supercharge his own companies or harm competitors.

Richard Painter, former chief White House ethics lawyer under former President George W. Bush and now a University of Minnesota law professor, told Fortune that Trump’s decision to give DOGE an advisory status rather than a government one was likely strategic. According to Painter, the setup lets Musk and his DOGE co-chief, Vivek Ramaswamy, avoid divesting their financial assets under laws that bar federal employees from participating in regulation and contracting that could affect their personal financial interests.

But, Painter added that advisory committees like DOGE must still follow certain rules. They include making records publicly available, holding public meetings, and allowing public participation. “Everybody knows these people have conflicts of interest, yet they’re giving advice to the government, and that’s okay, but you have to comply with the transparency provisions,” he said.

Musk’s conflicts span most anything involving transportation and communication, and therefore the very federal agencies in his crosshairs for budget cuts. His conflicts also include the fast-moving world of AI, which increasingly underpins critical technologies, shapes global power dynamics, and raises serious ethical and societal questions.

As venture capitalist and Trump critic Reid Hoffman recently wrote in the Financial Times, Musk’s direct ownership in xAI creates a “serious conflict of interest in terms of setting federal AI policies for all US companies,” raising red flags about Musk’s influence on everything from government contracts, to regulating AI companies, to restricting technology exports.

And that’s just the beginning. Here’s are some of the key AI-focused conflicts worth paying attention to:

AI policies via the AI ‘czar’

Trump is considering appointing an AI czar to coordinate federal policy and government use of the emerging technology, Axios reported. Musk is expected to work closely with any AI czar appointee, who will have marching orders “to keep America in the AI forefront” and “work with DOGE to use AI to root out waste, fraud and abuse, including entitlement fraud.” 

Could Musk steer government AI contracts to his own company, xAI? He could, said Richard Schoenstein, vice chair of litigation practice at law firm Tarter Krinsky & Drogin. In theory, Schoenstein explained, Musk’s xAI could benefit from favorable contracts, but he could also push the government to crack down on its competitors like OpenAI and Anthropic. He called Musk’s dual role as businessman and Trump advisor a “dangerous combination.

Musk, for example, has long complained about government bureaucracy hurting his businesses. Now, he could use his new DOGE role to eliminate any governmental hurdles to xAI, AI in general, or his other business interests, said Schoenstein.

However, Musk’s stance on AI isn’t always straightforward. For example, he has supported certain regulations of AI like California’s ultimately-doomed SB-1047 bill, meant to establish safety standards for advanced AI systems.

But Musk still has a stake in future government decisions around AI, including how AI companies can access data. Last month, for example, X quietly updated its privacy terms for Grok, the AI chatbot developed by xAI, to clarify that it uses X data to train xAI’s models. As head of DOGE, Musk could support policies that allow the broader use of data for AI development, including potentially loosening user privacy restrictions.

Schoenstein also worries about the huge amount of private information Musk has collected about U.S. citizens through his various businesses. X, xAI, and his Starlink satellite internet service hoover up vast amounts of information about what users look at online and who they are. He fears that Musk, because of his alliance with Trump, may now be more likely to share that information with the government. “Whereas some of the social media companies historically have taken a very protective stance about the privacy of their users, having a guy who owns X and owns xAI and owns a satellite system, basically in lockstep with the governing administration, is dangerous,” Schoenstein said.

AI-powered self-driving

Whether Musk will use DOGE to benefit the future deployment of Tesla’s AI-powered self-driving cars is another question. For years, most recently at an October demo, he’s promised to introduce robotaxis that can ferry passengers without drivers.

Musk’s position with DOGE may let him more powerfully advocate for lenient regulations that benefit Tesla. For example, the National Highway Traffic Safety Administration (NHTSA), which oversees vehicle safety standards, has a big say in Tesla’s Autopilot and Full Self-Driving (FSD) features. According to a Bloomberg report, Trump’s transition team is now seeking NHTSA policymakers to lead efforts on self-driving regulation, likely aiming to relax rules to accelerate development.

Such a change would come at a crucial juncture for the self-driving industry, said Schoenstein. And it wouldn’t require getting rid of the agency. “You could just change the leadership” and install “a business-friendly head, and that will lessen the enforcement bite,” he said.

Environmental policies that promote electric vehicles (EVs) are also crucial for Tesla’s success. Musk’s DOGE role could help him shape these regulations to favor Tesla, potentially by pushing for stricter emissions standards that benefit EV manufacturers or by influencing how subsidies and tax incentives are allocated. For clean transportation advocates, this is a good thing. But Musk has also supported cutting Biden’s $7,500 tax credit for EVs, which could impact other automakers.

xAI’s Memphis supercomputer

Another potential conflict of interest involves Colossus, xAI’s new supercomputer in Memphis. Musk has claimed it will be the world’s fastest AI supercomputer, and last month said he planned to double its computing power.

That would require a lot of electricity. Earlier this year the local utility agreed to supply xAI with 150 megawatts, subject to approval from the Tennessee Valley Authority, a federal utility. The TVA approved the extra electricity earlier this month, despite citizens rights groups and environmental campaigners raising concerns about the resulting strains on the city’s power grid and the area’s already poor air quality. 

The authority is governed by a board appointed by the president and confirmed by the Senate. Most of the current board member’s five-year terms will expire during Trump’s upcoming administration, which opens the door to packing it with members who are friendly to Musk’s interests. “There’s certainly concern about that relationship,” Amanda Garcia, a senior attorney at the Southern Environmental Law Center, told Fortune.

Her organization has complained about xAI already installing natural gas-fired turbines at the former factory in Memphis where the xAI’s supercomputer is located. The generators supply electricity directly to the facility without relying on the public power grid.

Memphis residents and environmental groups have raised concerns about the pollution generated by these gas-powered generators. Furthermore, xAI may have installed and operated them without securing the required permits, according to Garcia. The local agency has referred the issue to the EPA, which is currently reviewing the matter. Notably, the EPA would be a key agency under scrutiny in DOGE’s oversight.

Garcia pointed out that Trump’s pick for EPA commissioner, Lee Zeldin, has already mentioned wanting to make the U.S. a global leader in artificial intelligence. That statement, Garcia said, “seems like an odd thing for an EPA administrator to say,” but likely music to the ears of Musk and fellow AI entrepreneurs.  

Conflicts of interest aren’t new

Musk’s conflicts of interest through DOGE may seem unprecedented, but it’s been a problem before when it comes to outside advisors. It has even extended to AI matters under both Trump’s first administration and President Biden, said Marc Rotenberg, president and founder of the Center for AI and Digital Policy.

Former Google CEO Eric Schmidt, for example, while still a technical adviser to Google-parent Alphabet, became the chair of the National Security Commission on Artificial Intelligence in 2018, advising on national AI strategies. Beginning in 2016, he was also involved in the Defense Innovation Advisory Board, which connects the tech companies to the Pentagon. In addition, during the Biden administration Schmidt co-chaired the National Security Commission on Artificial Intelligence.

In response to criticism about conflicts of interest in his role with the Defense Innovation Advisory Board, Schmidt said emails and other communications were screened. He therefore wouldn’t see or be briefed about any business between Google or Alphabet and the Defense Department, he said in 2018.

As for Musk, Rotenberg said, he “should not personally benefit from the government reform proposals he puts forward—I don’t think there should be any doubt about that.” Then he added that the problem is much bigger than one man. “This has been a long running theme, particularly in the tech sector, for many years.”