Tesla to Invest $2B in Musk's xAI as EV Sales, Profits Decline

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Tesla announced it will invest $2 billion in Elon Musk's artificial intelligence startup xAI, as the automaker reported lower sales and profit in the latest quarter. Tesla's revenue fell 3% to $24.9 billion, while profit plunged 61% to $840 million. The company is facing challenges from rivals rolling out newer EV models, the end of a key US tax credit, and Musk's political rhetoric alienating some customers. Investors are increasingly focused on Tesla's push into self-driving tech and robotics as a way to offset pressures in its core vehicle business.

Why it matters

Tesla's investment in xAI signals the company's strategic pivot toward autonomous driving and robotics technologies as it navigates headwinds in its traditional automotive operations. This move underscores Musk's long-standing vision of using AI as a key enabler for Tesla's self-driving ambitions and broader robotics plans.

The details

Tesla said it will invest about $2 billion in Elon Musk's artificial intelligence startup xAI, deepening the ties between the two companies. This comes as Tesla reported lower sales and profits in the latest quarter, with revenue down 3% to $24.9 billion and profit plunging 61% to $840 million. Tesla is facing increased competition from rivals, the end of a key US EV tax credit, and backlash over Musk's political rhetoric, which has alienated some customers. The company is leaning on lower-priced 'Standard' versions of its best-selling Model 3 and Model Y to attract more price-sensitive buyers, a strategy analysts expect will be key to Tesla's 2026 delivery growth even if it pressures profit margins.

• Tesla reported its Q4 2025 financial results on January 28, 2026.

What’s next

Tesla's investment in xAI is expected to further strengthen the company's focus on autonomous driving and robotics technologies as it navigates challenges in its core vehicle business.