Inside Tesla's Bold Shift to AI, Energy and Humanoids

Despite reporting its second consecutive quarterly downturn, with annual revenue dropping to US$94.8bn, CEO Elon Musk remains bullish about Tesla’s long-term vision – even as the company pivots its mission from ‘Sustainable Abundance’ to ‘Amazing Abundance’.

Although profits dropped 61% in the final quarter of 2025, Elon has doubled down on ambitious investment plans spanning AI, related infrastructure and humanoid robots.

"We're making big investments for an epic future," he said during a Q&A call with investors held on 28 January. 

The world’s richest man has also confirmed that Tesla will halt production of the Model S and Model X at its California facility, clearing the way for the company’s most ambitious venture yet – the large-scale manufacture of humanoid robots.

Elon’s own AI firm, xAI, is also set to secure a US$2bn investment.

Reaffirming his belief that AI will bring forth a future of abundance, he revealed that Tesla continues to advance in vehicle autonomy and has now started to "produce Optimus robots at scale". 

China’s BYD recently overtook Tesla as the world’s biggest EV seller.

According to Tesla CFO Vaibhav Taneja, the US carmaker expects margins to face further pressure from its shift to a fully subscription-based model for Full Self-Driving (FSD).

Investments in solar power for AI

Keen to harness energy generation for AI infrastructure, Elon declared that the “solar opportunity remains vastly underestimated”.

He added: “We think the best way to add significant capability to the grid – lets say it is powering AI data centres – is solar and batteries on earth and solar in space.

“That's why we are going to work towards getting 100 gigawatts a year of solar cell production integrating across the entire supply chain from raw materials all the way to finished solar panels.”

As part of this green push, Elon said Tesla plans to become a “significant manufacturer of solar cells” amid “massive investments in AI”.

He added that this would drive further spending on batteries as well as the entire supply chain of batteries”.

Even after posting 26.6% year-on-year energy sector growth – with Megapack 3 and Megablock nearing launch – Vaibhav cautioned that the company faces “margin compression from the increased low cost competition, impacts to market from policy uncertainty and the cost of tariffs". 

Tesla Optimus launch

Set to make waves in the humanoid robotics arena, Tesla plans to unveil Optimus 3 within the coming months.

Elon described Optimus as “surprising to people” and “an incredibly capable robot”.

He continued: “Optimus really will be a general purpose robot that can learn by observing human behaviour.

“So, you can demonstrate a task or literally verbally describe a task or even show it a video and it will be able to do that task.”

New factories in the pipeline

Tesla anticipates 2026 as a year of substantial capital expenditure, with Vaibhav projecting CapEx to surpass US$20bn.

“We'll be paying for six factories, namely the refinery, LFP factory, cybercab, Semi, a new mega factory and the Optimus factory,” he notes.

“On top of it, we'll also be spending money for building our AI compute infrastructure and we'll continue investing in our existing factories to build more capacity and also the related infrastructure along with it and we'll also further expand our fleet of robotaxi and Optimus.”

AI chips and fab labs as limiting factor 

Elon noted that chip production could emerge as a key constraint on Tesla’s growth over the next three to four years.

“Completing the AI5 chip design and having it be a great chip is arguably the number-one most critical thing to get done, which is why I'm spending more time on that than currently anything else at Tesla,” he said. 

Looking further ahead, Elon revealed AI6 – “yet another big leap beyond AI5” – is expected to arrive in under 12 months.

Elon also elaborated on the urgent need for a 'TeraFab' chip plant that integrates logic, memory and packaging, warning: "If we don't do that, we're just going to be fundamentally limited by supply chain."

He added that, in a worst-case geopolitical scenario, the consequences would be severe.

China emerges as Tesla’s biggest competitor

Having lost ground to China’s BYD in the EV market, Elon predicts Tesla’s fiercest humanoid robotics competition will also originate from beyond the Great Wall.

“I do think that by far the biggest competition for humanoid robots will be from China,” he says. 

“China is incredibly good at scaling manufacturing. Actually, quite good at AI," adding that the models being distributed for free there “keep getting better".

"So, China's very good at AI, very good at manufacturing and will definitely be the toughest competition for Tesla.”