Tesla is accelerating its transformation from an electric vehicle manufacturer into a comprehensive AI and robotics company, as revealed during its fourth-quarter earnings call on Wednesday. CEO Elon Musk outlined an ambitious vision requiring $20 billion in investment—more than double the company’s $8.5 billion capex for fiscal 2025.
The most significant announcement was Tesla’s $2 billion investment in xAI, Musk’s AI startup behind the Grok chatbot, as part of a larger $20 billion Series E funding round. This partnership aims to leverage xAI’s expanding data center capabilities to advance Tesla’s autonomous vehicle and robotics initiatives. CFO Vaibhav Taneja emphasized the collaboration represents “efficient ways for others to help us” with compute and technical capabilities.
In a surprising strategic shift, Musk announced the discontinuation of the Model S and Model X by next quarter, leaving Tesla with just four vehicle models: the Cybertruck, Model 3, Model Y, and the upcoming Cybercab. The freed-up production space at Tesla’s Fremont factory will be repurposed for Optimus humanoid robot manufacturing, with a long-term goal of producing one million units annually.
Tesla’s Robotaxi service expansion plans were detailed for the first half of 2026, targeting Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas. While the service currently operates with safety monitors in Austin and San Francisco Bay Area, Musk indicated the company is being “very cautious” about removing human supervision for public riders, despite claiming FSD (Full Self-Driving) technology is already “100% unsupervised.”
The earnings call revealed Tesla’s automotive segment struggles, with auto revenue falling 11% year-over-year, while energy and services revenue jumped 25% and 18% respectively. Musk also discussed his personal involvement in developing Tesla’s AI5 chip, calling chip procurement “existential” for the company’s future and floating the idea of a “Terafab”—an in-house chip manufacturing plant integrating logic, memory, and packaging.
Regarding Optimus, Musk tempered expectations, stating the humanoid robot remains in “R&D phase” and isn’t contributing to manufacturing “in any material way.” An Optimus 3 unveiling is expected “in a few months.” Tesla’s stock rose 1.7% after market close following these announcements.
Key Quotes
We’ve updated the Tesla mission to amazing abundance, and this is an attempt to send a message of optimism about the future
Elon Musk articulated Tesla’s new mission statement during the earnings call, framing the company’s AI and robotics pivot as fundamentally optimistic about technology’s potential to create abundance rather than scarcity.
If I’m spending my Saturdays on something, it’s going to be something pretty important
Musk emphasized his personal involvement in developing Tesla’s AI5 chip, underscoring how critical he views chip procurement and in-house semiconductor manufacturing to Tesla’s AI ambitions.
There’s like some pretty nutty intersections, where there are a lot of humans who make mistakes and have accidents in various cities. So we want to make sure that FSD can handle those unusual intersections
Musk explained why Tesla is proceeding cautiously with removing safety monitors from its Robotaxi service, acknowledging the complexity of real-world driving scenarios that AI systems must master.
The agreement with xAI is in the spirit of finding efficient ways for others to help us
Tesla CFO Vaibhav Taneja described the strategic rationale behind the $2 billion xAI investment, positioning it as a way to access compute resources and technical capabilities needed for autonomous vehicles and robotics.
Our Take
Tesla’s earnings call reveals a company at an inflection point, making existential bets on AI and robotics while its core automotive business weakens. The $2 billion xAI investment is particularly strategic—it creates a closed-loop ecosystem where AI models can be trained on Tesla’s vast real-world driving data and deployed across vehicles and robots. However, the risks are substantial: discontinuing the Model S and X eliminates proven revenue streams for unproven robotics markets, and the Optimus robot remains firmly in R&D with no clear commercialization timeline. Musk’s chip manufacturing ambitions, while logical given AI compute constraints, represent another massive capital commitment in an already capital-intensive transformation. The market’s muted 1.7% stock increase suggests investors remain skeptical about whether Tesla can successfully execute this pivot while managing declining automotive revenues. This strategy will either position Tesla as the leader in physical AI or prove to be an overextended gamble that dilutes focus from its profitable energy business.
Why This Matters
Tesla’s pivot represents a watershed moment in the convergence of AI, robotics, and traditional manufacturing. The company’s willingness to sacrifice its premium vehicle lines for AI-driven robotics production signals a fundamental bet that physical AI—robots and autonomous systems—will define the next era of industrial automation and transportation.
The $2 billion xAI investment creates a powerful vertical integration between AI model development and real-world robotics applications, potentially accelerating breakthroughs in autonomous systems. This partnership could give Tesla advantages in training data, compute infrastructure, and AI capabilities that competitors lack.
For the broader AI industry, Tesla’s transformation validates the “physical AI” thesis—that AI’s most valuable applications will involve embodied intelligence in robots and autonomous vehicles, not just software. The company’s struggles with automotive revenue underscore how traditional business models are being disrupted by AI-first strategies, forcing established companies to make bold, risky pivots. Tesla’s chip manufacturing ambitions also highlight the critical importance of semiconductor supply chains for AI development, echoing concerns across the industry about compute constraints limiting AI progress.
Related Stories
- Meta Q4 Earnings: Zuckerberg Bets Big on AI with $135B Capex Plan
- Big Tech’s 2025 AI Plans: Meta, Apple, Tesla, Google Unveil Roadmap
- Elon Musk’s XAI Secures $6 Billion in Funding for Artificial Intelligence Research
- China’s EV Industry Embraces AI: ‘Electric Intelligent Vehicles’ Emerge
- Nvidia CEO Jensen Huang Reveals Public Speaking Struggles Despite AI Success
Source: https://www.businessinsider.com/tesla-q4-earnings-call-summary-robotaxi-optimus-ai5-chips-2026-1