Tesla said on Wednesday it will invest $2 billion in CEO Elon Musk’s artificial-intelligence company xAI – and that production plans for its Cybercab robotaxi were on track for this year.
The news supported Musk’s plan to pivot Tesla from an electric vehicle maker to an AI company, which is key to the company’s roughly $1.5 trillion valuation, while reassurance of production plans is critical for investor confidence as Tesla has repeatedly fallen short of promises made by Musk.
But Musk’s plan to build Cybercabs as well as humanoid robots, along with Semi trucks and Roadster sports cars, will mean a series of factory investments that will take capital expenditures above $20 billion this year, Chief Financial Officer Vaibhav Taneja said.
That is more than twice the $8.5 billion in 2025. Shares rose about 3.5% in after-hours trading, but pared gains following the capex details to trade up 1.8%.
“(That) makes rollout metrics – not deliveries – the most important leading indicator from here,” Monteiro said.
Musk, who has made a number of inaccurate forecasts about robotaxi rollout, said he expected to have fully autonomous vehicles in a quarter to half of the United States by the end of this year.
He had said robotaxis would reach half of the US population by the end of 2025 – before later narrowing that goal to deployment in the top eight to 10 metropolitan areas.
The company has since missed those targets with a limited robotaxi service in Austin, Texas. Tesla’s core EV business, which still accounts for most of the company’s current revenue, has been under strain as rivals roll out newer models, often at lower prices.
A US tax incentive for electric vehicles has also ended, and Musk’s far-right political rhetoric has alienated some customers.
On Wednesday, Musk told analysts on a conference call that Tesla would stop selling its Model S sedans and Model X SUVs – flagship vehicles that once established the company as a leader in the EV market but have since dwindled to account for a small fraction of revenue.
The factory space will be used to build robots.
Tesla’s revenue fell about 3% to roughly $94.83 billion in 2025, marking the company’s first annual decline in revenue.
To defend volumes, Tesla has relied heavily on discounts and incentives, and introduced lower-priced trims of its best sellers.
Wall Street expects the company to deliver 1.77 million vehicles in 2026, representing an 8.2% increase, according to Visible Alpha data. Adjusted earnings per share of 50 cents in the fourth quarter topped Wall Street targets of 45 cents, according to LSEG data.
Net income fell 61% to $840 million in the quarter.
Despite the sales drop, the company’s automotive gross margin excluding regulatory credits came in at 17.9%, up from 13.6% a year earlier and well above expectations of about 14.3%, according to Visible Alpha.
Its energy generation and storage business has proven a notable bright spot, benefiting from sustained demand for grid-scale batteries used to support renewable power and stabilize electricity networks.
Revenue from the energy generation and storage segment rose 25.5% to a record $3.84 billion in the December quarter, trouncing analysts’ estimates of $3.46 billion.
‘Scorching hot ai boom’
Investors have increasingly focused on Musk’s push into self-driving technology and robotics, with many looking for proof that the autonomy story is moving from promise to product. An investment by Tesla in xAI was long expected.
Analysts have said Tesla will benefit from xAI’s advanced models and growing valuation.
“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.
But Musk warned about a brewing shortage of memory chips that could hamstring Tesla’s plans in the coming years, adding that it should look to build a chip-making plant to protect itself.
“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.”
The rapid build-out of artificial-?intelligence infrastructure by US tech firms has absorbed much of the world’s memory-chip supply, which has lifted prices as manufacturers prioritize components for higher-margin data centers over consumer devices.
Investors have also been looking for signs that Tesla’s Full Self-Driving and robotaxi rollouts are advancing, including updates on regulatory progress and clearer timelines for the purpose-built Cybercab, which is designed without a steering wheel or pedals.
Cybercabs will be added to its robotaxi service that currently relies on Model Y vehicles running a version of Full Self-Driving and will also be available for consumers to buy.
Last week, Musk said initial production of the Cybercab robotaxi and the humanoid robot Optimus would be “agonizingly slow” before accelerating over time.
On Wednesday, he said Tesla was not expecting significant Optimus production volume until the end of 2026.
There are also regulatory hurdles involved with producing the Cybercab, which Musk has said will have no steering wheel or pedals – contrary to current federal design standards.
He has continued to predict rapid progress for Full Self-Driving, a vision he has outlined for nearly a decade, but has not provided firm dates for regulatory approval or broad unsupervised deployment. Still, Tesla’s shares rose about 11% in 2025.
An $878 billion pay package for Musk, pegged to a series of lofty operational and valuation milestones, reassured investors of his commitment to Tesla among his other business and political interests.
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