Tesla invests $2 billion in Musk's xAI and reiterates Cybercab production starts this year

Tesla said on Wednesday it will invest $2 billion in CEO Elon Musk’s artificial-intelligence company xAI - and that production plans for its Cybercab robotaxi were on track for ​this year.

Tesla said on Wednesday it will invest $2 billion in CEO Elon Musk’s artificial-intelligence company xAI and that production plans for its Cybercab robotaxi were on track for ​this year.

The news supported Musk’s plan to pivot Tesla from an electric vehicle maker to an AI company, which is key ‌to the company’s roughly $1.5 trillion valuation, while reassurance of production plans is critical for investor confidence as Tesla has repeatedly fallen short of promises ​made by Musk. But Musk’s plan to build Cybercabs as well as humanoid robots, along with Semi trucks and Roadster sports cars, will mean a series of factory investments that will take capital expenditures above $20 billion this year, Chief Financial Officer Vaibhav Taneja said. That is more than twice the $8.5 billion in 2025. Shares rose about 3.5% in after-hours trading, but pared gains following the capex details to trade up 1.8%.

Tesla is “entering a transition phase” where it is asking investors to underwrite potential revenue from self-driving software in its cars and robotaxi business before auto sales recover, said Thomas Monteiro, senior analyst at Investing.com.

“(That) makes rollout metrics - not deliveries - the most important leading indicator from here,” Monteiro said.

Musk, who has made a number of inaccurate forecasts about robotaxi rollout, said he expected to have fully autonomous vehicles in a quarter ​to half of the United States by the end of this year. He had said robotaxis would reach half of the U.S. population by the ⁠end of 2025, before later narrowing that goal to deployment in the top eight to 10 metropolitan areas. The company has since missed those targets with a limited robotaxi service in Austin, Texas. Tesla’s core EV business, which still accounts for most of the company’s current revenue, has been under strain as rivals roll out newer models, often at lower prices. A U.S. tax incentive for electric vehicles has also ​ended, and Musk’s far-right political rhetoric has alienated some customers.

On Wednesday, Musk ⁠told analysts on a conference call that Tesla would stop selling its Model S sedans and Model X SUVs; flagship vehicles that once established the company as a leader in the EV market but have since dwindled to account for a small fraction of revenue. The factory space will be used to build robots.