Tesla has committed $2 billion to xAI, the artificial intelligence company owned by its chief executive Elon Musk, as it recasts itself as an autonomy and robotics business while doubling down on spending for its next phase of growth.
The investment, announced alongside Tesla’s latest results, comes with assurances that production plans for the long-promised Cybercab robotaxi remain on course.
After years of missed timelines, Tesla is asking the market not to judge it on car sales but also on whether its self-driving vision finally turns into a working business.
This will not come cheap as Chief Financial Officer Vaibhav Taneja said capital expenditure would climb beyond $20 billion this year, more than twice the $8.5 billion spent in 2025, as Tesla expands factories and builds the computing backbone needed for autonomy, robotics and new vehicles.
Shares initially jumped in after-hours trading before easing back as the scale of the spending became clear.
Tesla wants investors to back future revenue from software, robotaxis and humanoid robots at a time when its core electric vehicle business is under pressure.
Competition has increased, prices have fallen, and a key US tax incentive for EV buyers has ended. Revenue slipped about 3% last year to roughly $94.8 billion, the first annual decline in Tesla’s history.
On a conference call, Musk acknowledged the transition and again pressed the case for autonomy as Tesla’s defining metric. Analysts agree that the focus has shifted. “(That) makes rollout metrics – not deliveries – the most important leading indicator from here,” said Thomas Monteiro, senior analyst at Investing.com.
Tesla says it is already running a limited driverless robotaxi service in Austin, Texas, using Model Y vehicles equipped with its Full Self-Driving software. The Cybercab, designed without a steering wheel or pedals, is meant to scale that effort.
Musk said he expects fully autonomous vehicles to operate across a large part of the United States by the end of the year, though he has previously set and missed similar targets.
On regulations, vehicles without traditional management do not fit current federal safety standards, and Tesla has not provided firm dates for approval or widespread unsupervised deployment. Even so, the company insists Cybercabs will be added to its robotaxi network and sold to consumers once production begins.
The spending surge will also fund projects that have sat on Tesla’s roadmap for years, including the Optimus humanoid robot, the Semi truck and the Roadster sports car.
Musk warned that early production of both Cybercab and Optimus would be slow, saying last week it would be “agonisingly slow” before accelerating. On Wednesday, he said Tesla does not expect meaningful Optimus volumes until late 2026.
There are supply risks as well. Musk cautioned that a global shortage of memory chips could limit Tesla’s ambitions as demand from large technology firms soaks up capacity for data centres.
He floated the idea of building a chip plant to protect the company. “If we don’t do that, we’re just going to be fundamentally limited by supply chain,” he said. “In a worst-case geopolitical situation, it would be quite a severe situation.”
While the car business faces challenges, one division is performing strongly. Tesla’s energy generation and storage unit posted record revenue of $3.84 billion in the fourth quarter, up 25.5% from a year earlier, driven by demand for grid-scale batteries that support renewable power and stabilise electricity networks. That growth has become a bright spot as vehicle margins are squeezed.
Financially, adjusted earnings per share beat expectations in the fourth quarter, but net income fell 61% to $840 million. Automotive gross margins, excluding regulatory credits, improved to 17.9%, well above forecasts.
To protect volumes, Tesla has leaned heavily on discounts and cheaper versions of its best-selling models, and Wall Street expects deliveries to rise modestly to about 1.77 million vehicles this year.
Some investors are enthusiastic about the pivot. “With Tesla’s legacy EV business slowing, Tesla investors can take part in the scorching hot AI boom,” said Andrew Rocco, a stock strategist at Zacks Investment Research.
