This had to be done with a view to settle fraud charges slapped on the company by USA financial regulators.
The news comes weeks after Tesla and Musk agreed to pay $20 million each as fine as part of a settlement with the US Securities and Exchange Commission.
Judge Alison Nathan of the US District Court for the Southern District of NY approved the deal, as reported by Reuters, which now resolves claims of securities fraud.
Tim Higgins of the Wall Street Journal on what's next for Tesla after Elon Musk steps down as chairman. The deal also calls for a new chairman to be appointed, and the naming of two new independent directors.
A Tesla spokesperson confirmed the settlement, but said the automaker would make no further comment on the matter.
Tesla says the new chip, developed in-house, is the first designed specifically to run such artificial-learning neural networks and that it uses the same connectors and dimensions as the Nvidia chip the company now uses, so owners can have it swapped directly.
The judge's decision was largely expected, even after Musk muddled the process by insulting the SEC in a series of tweets just a few days after reaching the deal.
The day after the tweet, Tesla's shares fell 7 percent when billionaire investor David Einhorn's Greenlight Capital hedge fund criticized the electric carmaker, saying Musk had been deceptive and the carmaker's woes resembled those of Lehman Brothers before its collapse.
While Tuesday's rally is good news for Tesla shareholders, all eyes are now on Tesla's third-quarter earnings report, expected at the end of October.
"Am considering taking Tesla private at $420". However, the lower priced version is not yet available, as Tesla is building the more expensive, long-range and performance versions of the Model 3 first. Why not Muskquila? At least it sounds like a type of alcohol and not like what we sound like when we're drunk and attempting to say Tesla-coil.