Tesla on Wednesday confirmed a $2 billion Tesla AI investment in xAI, the artificial intelligence company founded by CEO Elon Musk, reinforcing his long-stated ambition to transform Tesla from a traditional electric vehicle manufacturer into a full-fledged AI and robotics company. The announcement came alongside confirmation that production plans for Tesla’s long-awaited Cybercab robotaxi remain on track for launch later this year.
The Tesla AI investment is being viewed by investors as a strategic move to align the company with the fast-growing artificial intelligence sector at a time when its core EV business is facing intensifying competition, slowing sales growth, and reduced government incentives. Tesla’s market valuation, hovering around $1.5 trillion, increasingly reflects expectations tied to autonomy, robotics, and AI rather than vehicle deliveries alone.
Speaking alongside the results, Chief Financial Officer Vaibhav Taneja said Tesla’s aggressive expansion plans including Cybercabs, humanoid robots under the Optimus program, Semi trucks, and the long-delayed Roadster will push capital expenditures above $20 billion this year. That figure more than doubles the roughly $8.5 billion spent in 2025, highlighting how central the Tesla AI investment and factory expansion strategy have become.
Shares initially rose about 3.5 percent in after-hours trading following the announcement but later pared gains to around 1.8 percent as investors digested the higher capex outlook. Analysts noted that future valuation will depend less on traditional delivery numbers and more on measurable progress in autonomy and AI deployment.
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Tesla AI investment marks a major shift as the automaker bets big on robotaxis, robotics, and long-term autonomy despite pressure on its core EV business
Musk reiterated his confidence that fully autonomous vehicles could be operational across a quarter to half of the United States by the end of this year, though his past timelines for robotaxi deployment have repeatedly slipped. Tesla currently operates a limited robotaxi service in Austin using Model Y vehicles equipped with its Full Self-Driving software, while the purpose-built Cybercab designed without a steering wheel or pedals—remains subject to regulatory approval.
The Tesla AI investment also comes as Musk confirmed the company will stop selling its Model S and Model X vehicles, once flagships of the brand but now representing only a small share of revenue. Factory space previously allocated to those models will be repurposed for robotics and AI-related manufacturing.
Financially, reported revenue of about $94.83 billion in 2025, marking its first annual decline, down roughly 3 percent year-on-year. Net income fell sharply, dropping 61 percent to $840 million in the most recent quarter, as the company leaned heavily on discounts and incentives to protect volumes in an increasingly crowded EV market. Despite this, adjusted earnings per share beat expectations, supported by improved automotive gross margins excluding regulatory credits.
A notable bright spot remains energy generation and storage division, which saw revenue rise more than 25 percent to a record $3.84 billion in the December quarter, driven by strong demand for grid-scale battery systems. Analysts say this segment, alongside the Tesla AI investment, is helping offset pressure in vehicle sales.
Investors are increasingly focused on how integrate xAI’s advanced models into its autonomy stack, robotics programs, and future consumer products. Analysts argue that access to proprietary AI models could strengthen Tesla’s competitive position as legacy automakers and tech rivals race to develop self-driving systems.
Musk also warned of a potential global shortage of memory chips, noting that surging demand from AI data centers could constrain plans. He said the company may eventually need to consider building its own chip manufacturing capacity to protect against supply-chain risks, especially in a volatile geopolitical environment.
While Musk continues to project rapid progress on Full Self-Driving and robotics, regulatory hurdles remain significant, particularly for the Cybercab’s unconventional design. Still, Tesla shares rose about 11 percent over the past year, reflecting sustained investor belief in the long-term potential of the Tesla AI investment and Musk’s vision of an autonomous, AI-driven future.
