To create Elon Musk's AI future, Tesla plans to invest $20 billion

Tesla Plans $20 Billion Spending Push as It Pivots From Cars to AI and Robots

Tesla Inc. plans to spend $20 billion this year to simplify its electric-vehicle lineup and redirect resources toward robotics, artificial intelligence and autonomous driving, accelerating its transformation away from traditional car manufacturing.

The capital expenditure plan, unveiled Wednesday alongside fourth-quarter earnings, is roughly double what Wall Street had expected. The spending will fund production expansions at multiple factories, the scaling of Tesla’s nascent robotaxi business, and a major build-out of AI infrastructure.

Tesla also said it will discontinue the Model S and Model X, freeing factory capacity to produce Optimus humanoid robots.

“We’re making very, very big investments,” Chief Executive Officer Elon Musk said on a post-earnings conference call.

The overhaul also includes a $2 billion investment in Musk’s AI startup xAI and discussions around potentially building a semiconductor manufacturing facility, underscoring Tesla’s ambition to reorient around AI, autonomy and robotics at the expense of its core car business.

Investors back the pivot

Despite two years of declining vehicle sales and a tougher outlook for 2026, investors have broadly embraced Tesla’s reinvention. The stock rose 1.2% in extended trading Wednesday in New York.

“This quarter officially marks the fundamental shift from EV company to an all-in bet on robotaxi, energy and Optimus,” said Andrew Rocco, an analyst at Zacks Investment Research. “It looks like they’re almost ready to tear off the Band-Aid on the EV business and go full in on autonomy.”

Neither the ongoing EV sales slump nor Tesla’s modest earnings beat drew much focus during the call, as attention centered on future AI-driven businesses that remain early-stage and uncertain.

Deepening ties with xAI

Tesla said it reached an agreement this month to acquire preferred shares in xAI as part of the startup’s latest funding round. The companies also entered into a framework agreement aimed at strengthening collaboration and “enhancing Tesla’s ability to develop and deploy AI products and services into the physical world.”

The investment deepens ties across Musk’s business empire. Tesla already supplies Megapack energy storage systems to xAI, while xAI’s Grok chatbot is integrated into some Tesla vehicles. Bloomberg has reported that xAI ultimately aims to power humanoid robots such as Optimus.

“If Tesla is going to do as well as the bulls think, it’s going to be with robotaxis and robotics,” said Matt Maley, chief market strategist at Miller Tabak + Co. “This investment is exactly what they wanted to hear.”

The move comes despite a failed nonbinding shareholder vote in November that sought to encourage such an investment. Tesla said at the time it would continue exploring the option.

EV headwinds persist

Tesla reported adjusted earnings per share of 50 cents for the quarter, beating analysts’ expectations by five cents and snapping a four-quarter streak of earnings misses.

The profit beat partially offsets continued weakness in vehicle sales. Tesla earlier reported a 9% decline in 2025 deliveries, with the downturn accelerating in the fourth quarter as deliveries fell 16% year over year.

The EV slowdown has been driven by intensifying competition, the expiration of U.S. regulatory credits and backlash tied to Musk’s political activity. Revenue from regulatory credits dropped 22% in the fourth quarter after the Trump administration eliminated penalties for automakers that failed to meet fuel economy standards.

As a result, Tesla’s 2025 revenue declined for the first time.

Robotaxis take center stage

Tesla said it now has 1.1 million active subscribers for its Full Self-Driving software, up nearly 40% from a year earlier. The driver-assistance system, which still requires human supervision, will shift to a subscription-only model after Feb. 14.

The company plans to expand its robotaxi service to Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas in the first half of the year. Tesla launched automated ride-hailing in Austin in June and has recently begun operating a limited number of robotaxis there without human drivers, a milestone Musk had promised late last year.

The service remains in early stages and has missed multiple previous timelines. Tesla also operates a non-autonomous rideshare service in the San Francisco Bay Area and holds permits to test robotaxis in Nevada and Arizona.