The company said Wednesday it has agreed to invest about $2 billion in xAI, the artificial intelligence startup founded by Chief Executive Elon Musk. The move strengthens ties between Tesla and Musk’s broader AI ecosystem, underscoring how central advanced machine learning has become to the company’s long-term ambitions in self-driving technology and robotics. Tesla shares rose about 2% in extended trading following the announcement.
Musk has repeatedly argued that proprietary AI is critical to unlocking full autonomy, supporting both Tesla’s Full Self-Driving (FSD) software and its humanoid robot, Optimus. The investment signals that Tesla is willing to commit substantial capital to that vision, even as its core vehicle business faces intensifying competition.
For the three months ended December 31, Tesla reported revenue of $24.9 billion, slightly above analysts’ average estimate of $24.79 billion, according to LSEG data. Still, the automaker’s car business remains under pressure as rivals introduce newer models, often at lower price points. The expiration of a U.S. electric-vehicle tax incentive has added to the strain, while Musk’s polarizing political rhetoric has alienated some potential buyers.
Wall Street expects Tesla to deliver about 1.77 million vehicles in 2026, an 8.2% increase from prior levels, according to Visible Alpha data. Analysts say that growth is likely to be driven in part by Tesla’s reliance on lower-priced “Standard” versions of its best-selling Model 3 and Model Y, a strategy aimed at broadening appeal among more price-sensitive consumers, even if it weighs on margins.
Some investors view the margin pressure as a calculated trade-off. By expanding its vehicle fleet, Tesla could potentially generate higher-margin revenue later through software, including paid FSD features and future robotaxi services. That thesis has become increasingly central to the stock’s valuation.
Investor focus has sharpened around whether Tesla’s autonomy promises are translating into tangible progress. Market participants are looking for clearer timelines, regulatory milestones, and concrete updates on the rollout of robotaxis and fully autonomous vehicles, including the purpose-built Cybercab, which is designed without a steering wheel or pedals.
Musk has a long history of setting aggressive targets for robotaxis, at one point predicting they would reach half of the U.S. population by the end of 2025. That goal was later narrowed to deployments in eight to 10 major metropolitan areas, but those timelines have since been missed, and the company has not provided updated schedules. While Musk continues to forecast rapid advances in FSD, firm dates for regulatory approval or widespread unsupervised use remain elusive.
Tesla’s energy generation and storage business has emerged as a notable bright spot. The company said energy-storage deployments jumped about 29% in the fourth quarter to a record 14.2 gigawatt-hours, supported by strong demand for grid-scale batteries used to balance renewable energy and stabilize power networks.
Last year, Musk said Tesla aimed to begin production of the Cybercab in April 2026, describing it as a fully autonomous vehicle that would be integrated into its robotaxi service and also offered for sale to consumers. More recently, he cautioned that early production of both the Cybercab and the Optimus humanoid robot would be “agonizingly slow” before accelerating over time, leaving investors still seeking greater clarity on volumes and timelines.
Despite those uncertainties, Tesla remains the world’s most valuable automaker by a wide margin, with a market capitalization of roughly $1.5 trillion. Its shares rose about 11% in 2025, marking their slowest annual gain in three years, as investors weigh near-term challenges against the company’s ambitious bets on AI-driven autonomy.