Tesla Supercharges Robotic, CyberCab Ambitions With $2 Billion Investment in xAI

In Focus

• Tesla said CyberCab production is on track
• The company announced plans to retire Model S and Model X
• The EV maker will use Model S and X factory to manufacture robots

Tesla will be investing $2 billion in xAI, the artificial intelligence firm owned by CEO Elon Musk. The EV manufacturer also announced that production of the Cybercab robotaxi and Semi trucks is set to commence this year. According to the Global Banking and Finance Review, Tesla’s investment in xAI supports Musk’s desire to turn Tesla into an AI company. A significant portion of Tesla’s $1.5 trillion valuation currently depends on this move.

Q4 Performance Surpasses Analyst Expectations

Tesla’s fourth-quarter revenue stood at $24.9 billion, which is slightly higher than analyst projections of $24.79 billion. The company’s adjusted earnings per share of 50 cents also exceeded market targets of 45 cents. Tesla’s EV gross margin, excluding regulatory credits, stood at 17.9%, against the expected 14.3%.

Musk informed analysts that Tesla will be retiring its flagship vehicles, Model S sedans and Model X SUVs. These models established Tesla’s leadership in the EV market. However, their sales have reduced over time, and they now account for a small fraction of the company’s revenue.

Following Tesla’s collaboration with xAI, Musk said the factory space used to produce Model S and Model X will now be used to build robots. Overall, Tesla’s annual revenue dropped 3% in 2025, to about $94.83. This is the first time the company has recorded an annual decline.

Boosting Investor Confidence

For Tesla, reassuring investors of its production plans is critical to boosting their confidence. Often, the company has fallen short on promises made by Musk, which include introduction of robotaxi service across the U.S.

Tesla’s xAI $2 billion investment comes at a time when investors are focused on Musk’s push into robotics and self-driving technology. Beyond production promises, most investors want to see proof of a product. The EV maker is counting on the lower-priced standard versions of Model Y and Model 3 to attract customers.

As Musk plans to build CyberCabs, Semi trucks, Roadster sports cars, and humanoid robots, his companies will require multiple factory investments. According to Tesla’s Chief Financial Officer, Vaibhav Taneja, the capital spend for these improvements could be upwards of $20 billion, which is more than double the $8.5 billion in 2025.

EV Business Experiences Strains

Tesla’s electric vehicle business generates most of the company’s revenue. The business has experienced strain as competitors launch newer models at lower prices. Last year, China’s BYD took the global EV seller title after its sales overtook those of Tesla. BYD annual deliveries stood at 2.26 million units, compared to Tesla’s 1.65 million units.

Tesla’s sales were also affected by the expiry of EV tax incentives in the U.S. and Musk’s association with far-right politics. This year, investors expect Tesla deliveries to stand at 1.77 million units, which is an 8.2% increase from 2025. On January 28, 2025, Tesla stock rose 3.4% in extended trading.