Tesla Plots $20 Billion Spending Spree to Build Musk’s AI Future

Tesla Model 3 electric vehicles (EV) at the company's store in Colma, California, US, on Friday, Jan. 23, 2026. Tesla Inc. is scheduled to release earnings figures on January 28. Photographer: David Paul Morris/Bloomberg Photo by David Paul Morris /Bloomberg

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(Bloomberg) — Tesla Inc. plans $20 billion of spending this year to streamline its electric-vehicle lineup and shift resources toward robotics and AI, part of a sweeping set of changes pushing the company further from its roots as an automobile manufacturer.

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The capital expenditure plans laid out Wednesday – roughly twice as much as Wall Street was expecting – will support production expansion at multiple factories, scaling up the nascent robotaxi business and building out AI infrastructure. Tesla also revealed plans to discontinue the Model S and X vehicles and devote that plant capacity to building Optimus humanoid robots.

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“We’re making very, very big investments,” Chief Executive Officer Elon Musk said on a conference call after Tesla released fourth-quarter results.

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The dramatic moves also include a new agreement to invest $2 billion in Musk’s xAI startup and discussions to potentially build a semiconductor manufacturing facility. They underscore Tesla’s ambitions to reorient around artificial intelligence, driverless technology and robots at the expense of its car-selling business, which has endured two years of decline and faces more challenges in 2026. 

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Investors have broadly supported the reinvention, even as many of the new business lines remain far-off and uncertain prospects. Neither the EV sales slump nor Tesla’s earnings beat received much attention on Wednesday’s call.

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“This quarter officially marks the fundamental shift from EV company to an all-in bet on robotaxi, energy and Optimus,” said Andrew Rocco, an analyst with Zacks Investment Research. “It looks like they’re almost ready to tear off the Band-Aid on the EV business and go full in on autonomy.”

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The shares climbed 1.2% at 7:03 p.m. in extended trading in New York. The stock rallied to new highs last year despite underpeforming the broader market. 

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AI Agreement

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Tesla reached an agreement this month to acquire preferred shares as part of xAI’s latest funding round, according to the company’s fourth-quarter earnings statement. The companies also entered into a “framework agreement” to strengthen their relationship and “enhance Tesla’s ability to develop and deploy AI products and services into the physical world.”

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The investment highlights the deepening ties between Musk’s business interests and reinforces the growing focus on AI. 

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The xAI agreement will likely be welcomed by many investors and overshadow the earnings results, said Matt Maley, chief market strategist for Miller Tabak + Co. 

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“If Tesla is going to do as well as the bulls are thinking, it’s going to be with the robotaxi and robotics,” Maley said. “So, this investment is exactly what the bulls wanted to hear.”

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While Musk has previously expressed support for Tesla to invest in xAI, the decision comes as a surprise after an unsuccessful shareholder vote at the carmaker’s November annual meeting seemed to cloud the prospects. More of Tesla’s shareholders voted for a nonbinding measure encouraging such an investment, but a heavy number of abstentions meant the measure didn’t pass. Still, Tesla said then that it would continue to explore the possibility.