Pentagon CTO Emil Michael sold stakes in Perplexity AI and xAI amid ethics scrutiny

Emil Michael, the Pentagon's undersecretary of defense for research and engineering and the department's chief technology officer, sold his stake in Perplexity AI in June for between $5 million and $25 million, according to financial disclosures reviewed by The Guardian.

Michael previously sat on Perplexity's advisory board, stepping down at the start of 2025 before joining the Donald Trump administration that May.

The Perplexity sale isn't Michael's first exit this year. He also held a stake in Elon Musk's xAI, reported at $500,000 to $1 million when he entered government, and sold it on January 9 for between $5 million and $25 million—a gain of up to 4,800%, according to IBTimes UK. Not bad for a rideshare executive turned defense official.

The timing has its own punchline: The Office of Government Ethics issued him a divestiture certificate for the xAI holdings on December 18. Four days later, the Pentagon signed a fresh agreement to deploy xAI's Grok on its classified networks. He didn't actually sell until January 9.

Before joining government, Michael took a personal loan from Perplexity of between $250,000 and $500,000 at 4.57% interest, per his 2025 disclosures. In his ethics agreement, he pledged not to profit from unvested Perplexity shares—though the filings don't say whether June's sale was vested, unvested, or some of both.

The disclosures land as Michael has spent the year as the public face of the Pentagon's fight with Anthropic, a Claude developer that competes directly with Perplexity and xAI for the same government dollars. Trump ordered federal agencies to stop using Anthropic's technology on February 27, and the Pentagon formally branded the company a "supply chain risk" days later, barring military contractors from doing business with it.

U.S. District Judge Rita Lin ruled last week that the blacklist illegally retaliated against Anthropic for refusing to let its models be used for mass surveillance and autonomous lethal operations, vacating the designation and issuing a permanent injunction. By then, OpenAI had already taken over the Pentagon contract once meant for Anthropic, and the department had signed classified-network deals with seven other AI companies, including xAI.

Ethics specialists aren't thrilled with the sequencing. Richard Painter, a former White House ethics lawyer under President George W. Bush, told The Guardian Michael "should have sold all interest in the company before he started working." A Pentagon spokesperson pushed back, saying Michael and other defense officials "are in full compliance with ethics laws and regulations," and pointed to the department's multi-layered ethics review process.

Perplexity, meanwhile, is in talks with Nvidia for a new funding round that would value the company above $30 billion, more than 50% higher than the $20 billion valuation it held in September 2025.