Tesla on Wednesday signalled a stronger shift toward artificial intelligence by announcing a $2 billion investment in CEO Elon Musk’s AI company xAI, while confirming that production of its Cybercab robotaxi is still expected to begin this year. The update is central to Musk’s plan to reposition Tesla from a pure electric vehicle maker into an AI focused company, a vision tied closely to its roughly $1.5 trillion valuation.
The announcement lifted Tesla shares by about 3.5% in after hours trading before gains narrowed to 1.8% after details on higher spending emerged. Chief Financial Officer, Vaibhav Taneja said factory investments linked to Cybercabs, humanoid robots, Semi trucks and Roadster sports cars would push capital expenditure above $20 billion this year, more than double the $8.5 billion in 2025. An analyst described Tesla as “entering a transition phase” where investors are being asked to back future revenue from self driving software and robotaxi services before car sales recover, adding that “(That) makes rollout metrics not deliveries the most important leading indicator from here.”
Musk said he expects fully autonomous vehicles to operate in between 25% and 50% of the United States by the end of this year, after earlier forecasts were scaled back and missed with a limited robotaxi rollout in Austin, Texas. Tesla also confirmed it will stop selling Model S sedans and Model X SUVs, with factory space redirected to robot production. The company revenue fell about 3% to roughly $94.83 billion in 2025, marking its first annual decline. Net income dropped 61% to $840 million in the fourth quarter, even as adjusted earnings per share of $0.50 beat expectations. Automotive gross margin excluding regulatory credits rose to 17.9% from 13.6% a year earlier.
Tesla energy generation and storage business stood out, with revenue rising 25.5% to a record $3.84 billion in the December quarter. Investors remain focused on autonomy progress, regulatory clarity and Cybercab timelines. Musk warned of a potential memory chip shortage, saying, “If we don’t do that, we’re just going to be fundamentally limited by supply chain,” adding geopolitical risks could worsen the situation. Despite challenges, Tesla shares rose about 11% in 2025, while an $878 billion pay package for Musk reassured investors of his long term commitment.
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