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Internal sources told The Journal that the company, called Neuralink, was developing "neural lace" technology that would allow people to communicate directly with machines without going through a physical interface. Neuralink was registered as a medical-research company in California in July.
Neural lace involves implanting electrodes in the brain so people could upload or download their thoughts to or from a computer, according to the report. The product could allow humans to achieve higher levels of cognitive function.
Tesla declined to comment on the veracity of The Journal's report.
Musk has expressed his interest in neural lace technology before. Musk first described the potential product at Vox Media's Code Conference in 2016, saying it would allow humans to achieve symbiosis with machines.
He said neural lace could prevent a person from becoming a "house cat" to artificial intelligence.
"The solution that seems maybe the best is to have an AI layer," Musk said at the Vox Code Conference. "A third, digital layer that could work symbiotically."
Musk said on Twitter in January that he was preparing for an announcement regarding neural lace.