AUSTIN, Texas: Tesla said it will invest US$2 billion in Chief Executive Elon Musk's artificial intelligence startup xAI, underscoring the company's push to reposition itself as an AI and robotics leader as it prepares to begin production of its Cybercab robotaxi later this year.

The announcement supports Musk's long-stated vision of shifting Tesla beyond electric vehicles toward autonomy, robotics, and software, a strategy that underpins much of the company's roughly $1.5 trillion valuation. Tesla also reiterated that production plans for the Cybercab remain on track for this year, a key reassurance for investors after repeated delays to earlier robotaxi targets.

Tesla shares rose about 3.5 percent in after-hours trading, before paring gains to trade up around 1.8 percent after executives outlined sharply higher capital spending plans.

Chief Financial Officer Vaibhav Taneja said Musk's plans, which include Cybercabs, humanoid robots, Semi trucks, and Roadster sports cars, would push Tesla's capital expenditures above $20 billion this year, more than double the $8.5 billion spent in 2025.

Tesla is "entering a transition phase" in which investors are being asked to underwrite future revenue from self-driving software and robotaxi services before vehicle sales rebound, said Thomas Monteiro, a senior analyst at Investing.com.

"(That) makes rollout metrics, not deliveries, the most important leading indicator from here," Monteiro said.

Musk, who has previously made inaccurate forecasts about robotaxi rollouts, said he expects fully autonomous vehicles to operate across a quarter to half of the United States by the end of this year. He had earlier said robotaxis would reach half the U.S. population by the end of 2025, then narrowed the goal to deploying in eight to 10 major metropolitan areas. Tesla has since missed those targets, launching only a limited robotaxi service in Austin, Texas.

Tesla's core EV business, still its primary source of revenue, remains under pressure as rivals introduce newer, often cheaper models. The expiration of a U.S. tax incentive for electric vehicles has added to the strain, while Musk's far-right political rhetoric has alienated some customers.

Musk told analysts that Tesla will stop selling its Model S sedans and Model X SUVs, which are now its flagship models and account for only a small share of revenue. The factory space will instead be used to build robots.

Tesla reported revenue of about $94.83 billion in 2025, down roughly three percent from a year earlier, marking its first annual revenue decline. To defend volumes, the company relied heavily on discounts and incentives and introduced lower-priced trims. Wall Street expects Tesla to deliver 1.77 million vehicles in 2026, an 8.2 percent increase, according to Visible Alpha.

Adjusted earnings per share of 50 cents in the fourth quarter beat expectations of 45 cents, according to LSEG, though net income fell 61 percent to $840 million.

Automotive gross margin excluding regulatory credits rose to 17.9 percent from 13.6 percent a year earlier, exceeding expectations. Tesla's energy generation and storage business emerged as a bright spot, with revenue increasing 25.5 percent to a record $3.84 billion in the December quarter.

"With Tesla's legacy EV business slowing, Tesla investors can take part in the scorching hot AI boom," said Andrew Rocco, a stock strategist at Zacks Investment Research.

Musk also warned of a looming shortage of memory chips, saying Tesla may need to build its own chip plant to avoid supply constraints. "If we don't do that, we're just going to be fundamentally limited by supply chain," he said.

Cybercabs, which lack steering wheels or pedals, face regulatory hurdles. Musk said last week that early production of both Cybercabs and the humanoid robot Optimus would be "agonizingly slow," adding that significant Optimus volumes are not expected until late 2026.

Despite the challenges, Tesla shares rose about 11 percent in 2025, with investors citing confidence in Musk's long-term commitment following approval of his $878 billion pay package tied to ambitious performance milestones.