Tesla has adopted a new corporate bylaw that significantly restricts shareholders’ ability to sue company leadership for breaches of fiduciary duty, marking a consequential shift in its legal governance following its reincorporation in Texas.

The amendment, disclosed in a regulatory filing on Friday, introduces a 3 percent ownership threshold for initiating or maintaining derivative proceedings—lawsuits brought by shareholders on behalf of the company against directors or executives accused of wrongdoing.

“Tesla has adopted an ownership threshold requiring any shareholder or group of shareholders to hold shares of common stock sufficient to meet an ownership threshold of at least 3% of Tesla’s issued and outstanding shares in order to institute or maintain a derivative proceeding,” the filing stated. The change took effect as of May 15.

Given Tesla’s current market capitalization, which exceeds $1 trillion, a shareholder would need to hold a stake valued at more than $30 billion to meet this threshold, effectively barring all but the largest institutional investors from suing.

The automaker did not respond to requests for comment on the bylaw change.

Legal Experts Warn of Accountability Risks

Corporate law experts have raised concerns about the implications for shareholder rights. Ann Lipton, a securities law professor at Tulane University and former trial attorney, said the change is legally permissible under Texas law but poses a significant hurdle for accountability.

“Obviously, for a company of Tesla’s size, that would be a formidable barrier to anyone bringing a lawsuit for breach of fiduciary duty,” Lipton wrote in an email.

She noted that Tesla’s move leverages a Texas law that allows companies to set minimum ownership requirements for derivative suits. Tesla officially moved its incorporation from Delaware to Texas in June 2024, following shareholder approval and CEO Elon Musk’s strong criticism of Delaware’s judiciary after a major legal setback.

Fallout from Tornetta Ruling

The backdrop to this governance change is the high-profile Delaware case brought by Tesla shareholder Richard Tornetta, who held just nine shares when he sued to void Musk’s 2018 pay package. In January 2024, Delaware Chancery Court Chancellor Kathaleen McCormick ruled in Tornetta’s favor, rescinding Musk’s $56 billion compensation deal.

McCormick found that Musk exercised de facto control over Tesla’s board during the approval process for the pay plan and that the directors failed to negotiate at arm’s length.

“In fact, there is barely any evidence of negotiations at all. Rather than negotiate against Musk with the mindset of a third party, the compensation committee worked alongside him, almost as an advisory body,” leading the court to conclude that the shareholder vote had been tainted by incomplete and misleading disclosures.

Following the decision, Musk responded with a terse post on X: “Never incorporate your company in the state of Delaware.” Within months, Tesla shareholders approved a resolution to reincorporate in Texas, a state whose laws are considered more favorable to executives and boards.

Tesla has since appealed the Tornetta ruling. Delaware’s Supreme Court is expected to decide whether Musk can retain the shares granted through the voided pay package.

Shareholders’ Accountability Concern

Shareholder advocates and governance analysts say the 3% rule, while legally valid in Texas, severely restricts the ability of retail and mid-sized institutional investors to check executive power through the courts.

Some believe the Texas law is being weaponized to entrench corporate power, referencing the growing trend of companies like Tesla and SpaceX shifting to Texas jurisdictions amid public disputes with Delaware courts or federal regulators.

Tesla’s change also underscores broader concerns about the use of state-level legal levers to neutralize shareholder oversight. In Delaware, Tornetta’s lawsuit was permitted despite his minimal stake, highlighting the comparative openness of Delaware’s corporate law to minority shareholders.

By contrast, in Texas, the law now being applied by Tesla permits companies to bar virtually all derivative suits unless initiated by ultra-wealthy investors or coalitions of major funds—a requirement that may be practically impossible to meet in a timely or cohesive manner.

Tesla’s bylaw amendment could prompt similar actions by other Texas-incorporated firms or those considering reincorporation. The company has been at the forefront of challenging regulatory norms across jurisdictions, from environmental policies to labor laws and now corporate governance.

Analysts believe that the ruling of the Delaware Supreme Court will likely shape future shareholder litigation risk, not just for Tesla but for executives at other major corporations eyeing more favorable legal jurisdictions.

A last-minute addition by House Republicans to a proposed federal budget bill could dramatically reshape the landscape of artificial intelligence (AI) governance in the United States. The controversial provision, buried within the reconciliation package, would prohibit any state or local government from enacting or enforcing laws that regulate AI systems or automated decision-making technologies for the next ten years, unless the law specifically facilitates their deployment or operation.

If passed, the legislation would not only invalidate state-level laws currently aimed at curbing algorithmic bias and discrimination, but it would also prevent states from introducing new rules until at least 2035. That would create a regulatory void at a time when AI is increasingly embedded in housing, hiring, healthcare, and policing decisions, often without transparency or public accountability.

The provision’s insertion—just 48 hours before the bill was marked up by the House Energy and Commerce Committee—has drawn sharp rebukes from consumer advocates, legal experts, and a bipartisan group of state attorneys general. But beyond the legal ramifications, the move underscores a deepening ideological rift in Washington over how to manage a rapidly advancing technology that is transforming everything from job applications to public benefits distribution.

A Republican Vision: Deregulate, Deploy, Dominate

Supporters of the provision, mostly Republicans, argue that a patchwork of state-level AI regulations will stifle innovation, burden businesses, and threaten U.S. competitiveness in the global AI race. To them, federal preemption is a way to ensure a consistent, business-friendly national approach that allows tech firms to innovate without being slowed down by what they see as overzealous or ideologically driven state legislation.

The deregulatory stance is reminiscent of the Trump administration’s early actions to dismantle guardrails placed on AI. Upon returning to the office, President Donald Trump immediately revoked a Biden-era executive order that had established preliminary federal safety guidelines for AI development and deployment. The administration has made it clear that it sees AI regulation, particularly at the state level, as a roadblock, not a necessity.

That viewpoint is heavily influenced by corporate interests and key figures in the tech industry who have either backed Trump or aligned with his agenda. One of the most prominent is Elon Musk, the billionaire entrepreneur and early cofounder of OpenAI, who has publicly railed against what he calls “left-wing bias” in AI models.

Musk, now owner of X (formerly Twitter) and head of several companies heavily invested in AI, including xAI, has accused OpenAI’s ChatGPT and Google’s Gemini of being “woke” and serving a “leftist agenda.” He has repeatedly warned that these AI systems are being trained to push progressive values while censoring conservative viewpoints.

“The most important thing in training AI is that it is rigorously truthful. This is very, very important, essential,” Musk has said, claiming that the leading generative models reflect Silicon Valley’s liberal orthodoxy rather than political neutrality.

Musk’s criticisms have found a receptive audience among Republicans who are increasingly framing AI as another front in the broader culture war, arguing that without limits, AI tools risk becoming vehicles for “leftist indoctrination” rather than neutral technologies.

A Democratic Vision: Regulation, Transparency, Accountability

Democrats, by contrast, have pushed for stronger consumer protections, transparency, and bias mitigation mechanisms as AI systems proliferate. From algorithmic rent-setting tools to hiring software that filters applicants based on unverifiable data, Democrats argue that these systems can replicate and even amplify societal biases—unless regulators step in.

Several states governed by Democrats have already moved to impose guardrails. In California, laws now require companies to inform patients when generative AI is used in healthcare communications. In New York, employers using automated hiring tools must conduct annual bias audits. Illinois has legislation governing how facial recognition can be used in workplace surveillance.

But if the House reconciliation bill passes with the AI preemption clause intact, these state-level laws would become unenforceable, raising alarms among civil rights advocates and state officials.

“This bill is a sweeping and reckless attempt to shield some of the largest and most powerful corporations in the world—from big tech monopolies to RealPage, UnitedHealth Group and others—from any sort of accountability,” said Lee Hepner, senior legal counsel at the American Economic Liberties Project.

AI Harms Are Not Hypothetical

The real-world impact of unregulated AI systems is already being felt. A coalition of state attorneys general recently filed suit against RealPage, a property tech firm accused of colluding with landlords to artificially raise rents using an algorithmic pricing tool. Another company, SafeRent, recently settled a class-action suit filed by Black and Hispanic renters who say they were denied apartments based on secretive AI-generated scores.

Despite these concerns, House Republicans appear determined to block what they see as overreach by liberal states. The bill would not only block future regulations but erase many that are already in place, effectively freezing AI oversight at a time when the technology’s use is exploding across industries.

 A Looming Senate Battle

The battle is far from over as the measure could run into resistance in the Senate, where Democrats hold a slim majority. Given that the provision was added to a reconciliation bill—a legislative vehicle reserved for fiscal issues—Senate rules may prohibit its inclusion. Under the Byrd Rule, non-budgetary provisions can be struck from reconciliation bills if they are deemed extraneous.

“I don’t know whether it will pass the Byrd Rule,” said Sen. John Cornyn, R-Texas, referring to a provision that requires that all parts of a budget reconciliation bill, like the GOP plan, focus mainly on the budgetary matters rather than general policy aims.

“That sounds to me like a policy change. I’m not going to speculate what the parliamentarian is going to do but I think it is unlikely to make it,” Cornyn said.

If the bill becomes law as written, it would create a federal freeze on AI regulation, just as experts say the next decade will determine whether AI serves the public interest or entrenches inequality. Many see the fight over this provision as a litmus test for how the U.S. government intends to manage technological change and who it is willing to protect in the process.

The United Arab Emirates has struck a landmark agreement with the United States to build what will be the largest artificial intelligence campus outside US borders — a deal sealed during Donald Trump’s recent visit to the Gulf and hailed as a turning point in US-UAE tech cooperation.

However, it has also sparked concerns in Washington over the possibility of Chinese access to advanced US-origin AI technology.

Central to the agreement is a massive 10-square-mile AI campus in Abu Dhabi, with a 5-gigawatt power capacity dedicated to data centers that will run cutting-edge artificial intelligence workloads. The campus will be constructed by G42, a state-backed Emirati firm, but according to the US Commerce Department, American companies will operate the data centers and deliver US-managed cloud services across the region.

“American companies will operate the datacenters and offer American-managed cloud services throughout the region,” said US Commerce Secretary Howard Lutnick.

The deal also includes US technology companies Qualcomm and Amazon Web Services (AWS), which will partner with UAE entities to develop AI infrastructure, bolster cybersecurity, and accelerate regional cloud adoption. AWS will focus on building secure cloud systems, while Qualcomm is expected to set up an AI-focused engineering hub.

A Major Break From Biden-Era Tech Restrictions

This deal marks a stark departure from the cautious stance adopted under President Joe Biden, whose administration restricted exports of AI chips to countries like the UAE out of concern that such technologies could find their way into Chinese hands.

Under Trump’s leadership, those restrictions are being peeled back. His newly appointed AI czar, David Sacks, speaking in Riyadh earlier this week, criticized the Biden-era controls, stating they were “never intended to capture friends, allies, strategic partners.” He added that a smarter approach involves giving US allies access to key technologies while maintaining oversight.

At the core of the deal is access to Nvidia’s most advanced chips — a prized asset in the AI race. Although the specific models were not disclosed publicly, Reuters reported that the UAE will be permitted to import up to 500,000 of Nvidia’s high-end AI chips annually starting in 2025.

Nvidia CEO Jensen Huang was seen in televised footage with Trump and UAE President Sheikh Mohamed bin Zayed Al Nahyan during meetings at the Qasr Al Watan palace in Abu Dhabi. The optics underscore the level of coordination between tech industry giants and the new Trump administration in shaping global AI infrastructure.

A Win for the UAE, But at What Cost?

For the UAE, the deal is a major breakthrough. The Gulf country has long harbored ambitions to become a global AI powerhouse. It has poured billions into AI investments through state-linked vehicles like G42 and MGX, while courting partnerships with top Western firms.

Until now, its ambitions were curtailed by US export controls, which limited access to the most powerful chips and forced G42 to unwind partnerships with Chinese tech firms. Under pressure from Washington, G42 reportedly began dismantling Huawei’s infrastructure in its systems and sold off some Chinese investments. These actions paved the way for Thursday’s announcement.

“This shift enables [the UAE] to deepen its technology partnership with the US while still preserving trade ties with China,” said Mohammed Soliman, senior fellow at the Middle East Institute.

“It doesn’t mean abandoning China but it does mean recalibrating tech strategy to align with US standards and protocols where it matters most: compute, cloud, and chip supply chains.”

The deal also commits the UAE to building, financing, or investing in AI data centers in the United States that are “at least as large and powerful” as the ones being developed in Abu Dhabi. The White House said this ensures a balance of capabilities while creating tech jobs domestically.

Additionally, the agreement includes “historic commitments” by the UAE to align its national security regulations with the US, according to fact sheets released by the Trump administration. These include “strong protections to prevent the diversion of US-origin technology” — a thinly veiled reference to fears of re-export to China.

Lingering Worries Over China

However, the deal has unsettled some in Washington and among US national security circles, who argue that tech leakage remains a real threat, especially given the UAE’s long-standing ties with China. Huawei and Alibaba Cloud, two of China’s tech giants, still maintain a visible presence in the UAE, raising concerns about potential overlap or backdoor access.

A Reuters investigation earlier this year revealed that AI chips had been smuggled from the UAE, Singapore, and Malaysia into China, bypassing export restrictions meant to cut off Beijing’s access to advanced semiconductors. That report is now being reexamined in light of the new agreement.

National security analysts warn that even with US firms managing operations, risks persist.

Even so, top US tech CEOs — from OpenAI’s Sam Altman to Nvidia’s Huang — have voiced support for the deal. With China developing its own advanced AI models and custom chips, the opportunity to extend US platforms globally through friendly partners is seen as both a strategic and economic win.

The agreement caps months of high-level diplomatic and corporate engagement. AI was a major focus when Sheikh Mohamed bin Zayed visited Washington in December, just days before Biden left office. Since then, Emirati investment firms have increased their exposure to US AI startups, including OpenAI and Elon Musk’s xAI.

Microsoft, another major player in the space, announced a $1.5 billion investment in G42 last year, suggesting a coordinated push to embed American AI technology in the Middle East while curbing Chinese influence.

Trump’s visit to the region and the string of agreements that followed signal a broader strategic reset. It is seen as a recalibration aimed at ensuring the US retains influence in global AI infrastructure while extending its technological reach beyond its borders.