Tesla Invests $2 Billion in Musk’s xAI, Reinforces Shift Toward AI-Driven Future
Tesla has announced a $2 billion investment in xAI, the artificial intelligence company founded by its CEO Elon Musk, while reaffirming plans to begin production of its autonomous Cybercab vehicle later this year. The move underscores Tesla’s broader strategy to evolve from an electric vehicle manufacturer into an AI-centric technology company—a transformation central to its current market valuation of approximately $1.5 trillion.
Speaking during the company’s fourth-quarter earnings call, Musk said that manufacturing the Cybercab, humanoid Optimus robots, Semi trucks, and the Roadster sports car will require substantial factory investments. As a result, Tesla’s capital expenditures are expected to exceed $20 billion this year, up from $8.5 billion in 2025. Chief Financial Officer Vaibhav Taneja noted that the increase is intended to support large-scale production of upcoming projects.
Despite broader challenges, Tesla’s energy generation and storage business delivered strong performance, with revenue rising 25.5% to $3.84 billion in the latest quarter—marking a record high and surpassing analyst expectations. The results reflect sustained demand for grid-scale batteries to support renewable energy and stabilize power networks.
Musk also confirmed that Tesla has discontinued sales of the Model S and Model X, repurposing production lines at its Fremont factory for robot manufacturing as part of its push into AI and robotics. Tesla shares initially jumped 3.5% following the announcement before trimming gains to close up 1.8%.
Tesla is currently prioritizing the development of full self-driving software and its robotaxi service, with expectations that the Cybercab will launch without a steering wheel or pedals, despite ongoing regulatory hurdles related to federal safety standards. Musk noted that early production of both the Cybercab and Optimus robots will be limited, with output scaling gradually throughout the year.
The investment in xAI is intended to accelerate the development of advanced AI models, enabling Tesla to extend innovation beyond electric vehicles into intelligent, AI-powered services. Amid intensifying global competition for AI components, Musk warned of a potential shortage of memory chips and suggested building a dedicated semiconductor facility to shield Tesla from supply chain constraints.