Tesla announced a $2 billion investment in Elon Musk’s AI company xAI, confirming Cybercab robotaxi production plans for this year. Musk aims to pivot Tesla into an AI company, but this requires significant factory investments, pushing capital expenditures over $20 billion. Shares rose 3.5% but pared gains post-capex details.

Tesla faces a pivotal transition phase, shifting focus to self-driving software revenue and robotaxi business. Musk aims for fully autonomous vehicles in quarter to half of the U.S. by year-end, despite missing previous robotaxi rollout targets.

Tesla’s core EV business struggles as rivals launch newer models and U.S. EV tax incentives end. Musk announced discontinuation of Model S and Model X sales to focus on robot production. Revenue fell 3% in 2025, with Wall Street expecting 1.77 million vehicle deliveries in 2026.

Despite a drop in sales, Tesla’s automotive gross margin improved to 17.9% in the December quarter, boosted by strong performance in the energy generation and storage segment. Revenue from this segment soared 25.5% to a record $3.84 billion, exceeding analysts’ estimates.

Investors eye Tesla’s push into AI and self-driving technology with xAI investment. Tesla investors see opportunity in the AI sector amid the EV slowdown. Musk warns of memory chip shortage impacting Tesla’s plans, suggesting the need for a chip-making plant to secure supply chain.

Investors await progress on Tesla’s Full Self-Driving and robotaxi initiatives, including updates on regulatory advancements and timelines for the Cybercab. Musk envisions rapid growth for Full Self-Driving, but regulatory hurdles remain. Tesla’s shares rose 11% in 2025, bolstered by Musk’s commitment to the company amidst other interests.

Read more at Yahoo Finance: Tesla invests $2 billion in Musk’s xAI and reiterates Cybercab production starts this year