Tesla Bets Big on AI With $2 Bn xAI Investment as EV Sales Slump

Tesla said on Wednesday it would invest $2 billion in chief executive Elon Musk’s artificial intelligence venture, xAI, and reaffirmed that production plans for its Cybercab robotaxi remained on track for this year.

The announcement underpinned Musk’s ambition to reposition Tesla from a pure electric-vehicle maker into an AI-led company, a narrative central to its roughly $1.5-trillion valuation.

However, Musk’s plans to roll out Cybercab robotaxis, humanoid robots, semi trucks, and the long-delayed Roadster sports car will require substantial factory investment. Chief financial officer Vaibhav Taneja said in the Q4 earnings call that capital expenditure would exceed $20 billion this year, more than double the $8.5 billion spent in 2025. Tesla shares initially rose about 3.5% in after-hours trading, before trimming gains to around 1.8% following the capex disclosure.

Musk, who has repeatedly revised timelines for robotaxi deployment, said he expected fully autonomous vehicles to operate across the US this year. He had previously claimed robotaxis would reach half of the US population by the end of 2025, later narrowing that target to the top eight to 10 metropolitan areas. Tesla has since missed those goals, launching only a limited robotaxi service in Austin, Texas.

Tesla’s core EV business—still responsible for most of its revenue—has come under pressure as competitors introduce newer, cheaper models. The expiry of a US electric-vehicle tax incentive and Musk’s political rhetoric have also alienated some customers.

On the same call, Musk said Tesla would stop selling its Model S and Model X vehicles—once flagship products that helped establish the brand—as they now account for only a small share of revenue. The freed-up factory space will be repurposed for robot production.

Tesla’s revenue fell about 3% to roughly $94.83 billion in 2025, marking its first annual decline. To defend volumes, the company relied heavily on discounts and incentives and introduced lower-priced variants of its best-selling models. Wall Street expects Tesla to deliver 1.77 million vehicles in 2026, an increase of 8.2%, according to Visible Alpha.

Investors have increasingly focused on Musk’s push into self-driving technology and robotics, looking for evidence that Tesla’s autonomy narrative is moving from promise to product.