Tesla Pivots: Billions for AI & Robots, S/X Cars Axed

For the first time in its history, Tesla recorded a decline in annual revenue in 2025, with a 3% decrease, and a staggering 61% drop in profits. Elon Musk revealed the company's strategic pivot, announcing a massive $20 billion investment planned for the upcoming year, primarily focused on artificial intelligence and robotics.

As part of this shift, Tesla will discontinue production of its S and X models. The California factory previously responsible for these vehicles will be retooled to manufacture Optimus humanoid robots, with an ambitious target of one million units produced annually.

Further investments will be directed towards Musk's xAI venture ($2 billion), the development of the Cybercab (a fully autonomous vehicle), the Tesla semi-truck, and expanded battery and lithium production facilities. Musk characterized these substantial capital expenditures as crucial for securing an "epic future."

This financial downturn and strategic redirection follow a period of controversy for Musk, including his involvement in politics and issues surrounding AI-generated content on his X platform. Other major tech companies like Meta, Microsoft, and Alphabet are also significantly increasing capital spending to support AI development.

Tesla's Chief Financial Officer, Vaibhav Taneja, confirmed the company possesses over $44 billion in cash and investments to fund these initiatives, with potential for additional debt financing if needed. Musk emphasized the necessity of these investments, stating some are being made "out of desperation" due to the difficulty in building essential components like cathode and lithium refining.