Tesla reveals $2 billion investment in Elon Musk’s xAI and officially kills the Model S and Model X

Tesla CEO Elon Musk kicked off the new year by springing several eye-popping surprises on shareholders, including a $2 billion Tesla investment in one of his own companies (the artificial intelligence firm xAI), and the abrupt elimination of two of the company’s car models, the Model S and the Model X.

The moves, remarkable even in the context of Musk’s unfettered management style, underscore the profound transformation underway at the car maker as it loses ground in the EV market to Chinese rivals. In place of the discontinued car models, Musk said that Tesla will use the freed up factory space to build Optimus robots, a still largely experimental line of humanoid robots that Musk says will eventually perform everything from household chores to surgery.

Tesla executives emphasized that the investment in xAI would build efficiencies for Tesla, as it wouldn’t have to expend similar resources on AI, and Musk said it would ultimately help Tesla manage the enormous fleets of autonomous vehicles and Optimus robots.

“We’re just doing what shareholders asked us to do, pretty much,” Musk said Wednesday evening on the call, noting that “a lot” of investors had asked for the investment in xAI. 

Shares of Tesla were up about 1.8% in after-hours trading on Wednesday following the results.

Revenue was down 3% year-over-year in the fourth quarter, which some analysts have cited due to a slowdown in EV sales because of the end of federal tax credits. Still, Tesla beat Wall Street targets, posting $24.9 billion in revenue versus $24.8 billion estimates. 

Musk highlighted that Tesla had changed its mission to “build a world of amazing abundance,” from “to accelerate the world’s transition to sustainable energy,” and spoke about how the most likely path of AI was to help all humans obtain “universal high income” and better medical care. The language used on the call, which included mention of a hypothetical rare earth refinery, which “we do desperately need in America” hinted at the time he has spent with President Trump over the last year.

Tesla has been pulling away from its roots as a carmaker recently, in favor of autonomous software and robotics. “It’s time to basically bring the Model S and X programs to an end with an honorable discharge, because we’re really moving into a future that is based on autonomy,” Musk said. 

Musk said that Tesla was operating 500 robotaxis across both Austin and San Francisco, and he said that it was conducting “randomly selected paid rides” with no safety driver in Austin, though it’s unclear at this time how many unsupervised rides have taken place. For the first time, Tesla shared this quarter how many of its customers were purchasing its Full Self Driving (FSD) software. There were 1.1 million subscriptions in 2025, up from 800,000 in 2024.

Musk has been making promises on autonomy for over a decade, though he has been far behind in his timelines and the company has yet to deliver much profit from this line of its business. On Wednesday’s earnings call, CFO Vaibhav Taneja said of Tesla’s robotaxi fleet that, because Tesla was still in the “early phase” of its fleet deployment and still doing a lot of validation and testing, the “revenue and cost per mile metrics are not meaningful to discuss at the moment.”

Taneja also talked up the investment in xAI, noting that Grok, the chatbot made by xAI, was already in use across Tesla’s fleet. “Today, if you look at Tesla vehicles, we are using Grok in there,” he said.

During his appearance at the World Economic Forum in Davos earlier this month, Musk said that Tesla planned to begin selling Optimus robots by the end of next year. By repurposing the space in its Fremont factory, Tesla said Wednesday, it will be able to build 1 million Optimus robots each year.

This story was originally featured on Fortune.com