Tesla Reveals Plans for $2B Investment in Musk’s xAI

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Tesla Inc. revealed plans to invest $2 billion into Chief Executive Officer Elon Musk’s artificial intelligence company, xAI, while reporting higher-than-expected profit for the fourth quarter.  “Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale,” Tesla said in its quarterly statement. The investment underscores the deepening ties between Musk’s business interests and highlights Tesla’s growing focus on AI. The EV maker has been increasingly emphasizing AI, driverless technology and humanoid robots as its traditional business of selling automobiles has struggled. Bloomberg's Ed Ludlow and James Cakmak, Co-Founder and Chief Investment Officer at Clockwise Capital react to Tesla's earnings.  -- Tesla Inc. will spend over $20 billion on a dramatic reshuffling of factory lines reflecting Elon Musk’s repositioning of the carmaker coming off a multiyear sales slump. The capital expenditures planned for 2026 — more than double last year’s outlay and almost twice as much as Wall Street was expecting — will go to ramping up production of cars, batteries and robots across half a dozen plants. To make room for new Optimus humanoids, Tesla will discontinue its two oldest vehicles, the Model S sedan and Model X SUV. “We’re making very, very big investments,” Musk said on a call after Tesla released better-than-expected quarterly results. Tesla shares rose more than 3% as of 5:35 a.m. Thursday in New York, before the start of regular trading. Tesla also announced a surprise agreement to invest about $2 billion into Musk’s money-losing artificial intelligence startup, xAI, and signaled it’s likely to build a semiconductor manufacturing facility. The moves underscore Tesla’s ambitions to reorient around AI, driverless technology and robots at the expense of its car business, which faces more challenges in 2026 after consecutive annual sales declines. Read More: Musk Says Tesla Needs to Build ‘TeraFab’ to Manufacture Chips Investors have broadly supported the reinvention, even as the new business lines either remain far off or uncertain to succeed. Neither the broader auto industry’s EV winter nor Tesla’s earnings beat garnered much attention on Wednesday’s call. “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.” AI Agreement Tesla agreed this month to acquire preferred shares in xAI as part of the closely held company’s latest funding round. The companies also entered into a “framework” accord to strengthen their relationship and “enhance Tesla’s ability to develop and deploy AI products and services into the physical world,” the company said in its earnings release. The investment highlights the deepening ties between Musk’s business interests and reinforces the growing focus on AI. 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. “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.” While Musk has previously voiced support for Tesla investing in xAI, the move follows an unsuccessful shareholder vote on the prospect in November. While more of Tesla’s shareholders voted for a nonbinding measure encouraging an investment, a significant number of abstentions meant the measure didn’t pass. Still, Tesla said then that it would continue to explore the possibility. The two companies already work together. Tesla has sold Megapack energy storage systems to xAI, and xAI’s Grok chatbot is integrated into some Tesla vehicles. Bloomberg reported earlier this month that xAI told investors its aims to build AI will eventually power humanoid robots such as Optimus. -------- Watch Bloomberg Radio LIVE on YouTube Weekdays 7am-6pm ET WATCH HERE: http://bit.ly/3vTiACF Follow us on X: https://twitter.com/BloombergRadio Subscribe to our Podcasts: Bloomberg Daybreak: http://bit.ly/3DWYoAN Bloomberg Surveillance: http://bit.ly/3OPtReI Bloomberg Intelligence: http://bit.ly/3YrBfOi Balance of Power: http://bit.ly/3OO8eLC Bloomberg Businessweek: http://bit.ly/3IPl60i Listen on Apple CarPlay and Android Auto with the Bloomberg Business app: Apple CarPlay: https://apple.co/486mghI Android Auto: https://bit.ly/49benZy Visit our YouTube channels: Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts Bloomberg Television: https://www.youtube.com/@markets Bloomberg Originals: https://www.youtube.com/bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake