In a move that has sparked intense debate over corporate governance, Tesla officially announced a $2 billion investment in Elon Musk’s AI startup, xAI, on Wednesday, January 28, 2026.
The disclosure was made in Tesla’s Q4 2025 earnings report, where the company revealed it had entered an agreement on January 16 to acquire Series E Preferred Stock in xAI. This investment makes Tesla a key participant in xAI’s massive $20 billion funding round, which valued the startup at approximately $230 billion.
1. Bypassing the Shareholder Vote
The investment is particularly controversial because it comes just months after Tesla shareholders rejected a nonbinding proposal in November 2025 that would have authorized a larger $5 billion investment in xAI.
- The Loophole: Tesla’s board proceeded with the $2 billion deal by structuring it as an acquisition on “market terms” consistent with other external investors like Nvidia, Cisco, and Fidelity.
- Strategic Justification: Tesla claims the investment is vital for “Master Plan Part IV,” which aims to integrate xAI’s digital intelligence (Grok) into Tesla’s physical products like Optimus robots and the Cybercab.
2. Financial Context: A Tale of Two Realities
Tesla announced the $2 billion outflow alongside its first-ever annual revenue decline, signaling a definitive pivot away from being “just an EV company.”
| Metric | FY 2024 | FY 2025 | Change (YoY) |
| Total Revenue | $97.7 Billion | $94.8 Billion | ↓ 3% |
| Net Profit (GAAP) | $7.1 Billion | $3.8 Billion | ↓ 46% |
| Automotive Revenue | $78.1 Billion | $69.5 Billion | ↓ 11% |
| Capex (Planned 2026) | $8.5 Billion | >$20 Billion | ↑ 135% |
3. The “Death” of Flagship Models
To fund this AI-first future, Musk announced the end of an era for Tesla’s most iconic luxury vehicles:
- Model S & Model X Terminated: Production of Tesla’s flagship sedan and SUV has officially ended.
- Factory Re-tooling: The Fremont, California factory space previously used for the S/X lines will be repurposed for Optimus robot production, with a target of 1 million units per year.
4. The “Cybercab” Roadmap
Despite the revenue drop, Tesla shares rose 3% in after-hours trading as investors cheered a concrete timeline for the robotaxi:
- Production Start: Reconfirmed for mid-2026.
- Regional Launch: Fully autonomous service (without safety drivers) is slated to begin in Austin, Las Vegas, Miami, and Phoenix in the first half of 2026.
- FSD Adoption: Full Self-Driving subscriptions grew 40% in 2025, reaching 1.1 million users, providing a high-margin software cushion for the company.
Conclusion: A High-Stakes Transformation
By investing $2 billion in xAI, Tesla is tethering its future to the success of Musk’s private AI ventures. While critics view this as a potential breach of fiduciary duty, Musk argues that the “Master Plan” requires Tesla to control the entire stack of “Physical AI.” As capital expenditure is set to more than double to $20 billion in 2026, the company is effectively betting the farm that Optimus and Cybercabs will replace the Model 3/Y as the primary engines of wealth.
