Tesla boosts spending plans to $25bn as Elon Musk doubles down on AI bet
CEO warns investors to expect ‘very significant’ spending increase on self-driving taxis, trucks, robots and chip factories
Tesla boosted its spending plans to $25bn this year as Elon Musk announced a substantial increase in investment for self-driving taxis, trucks, robots and a massive new chip factory to power its AI ambitions.
The new forecast came as Tesla on Wednesday reported that first-quarter profit rose 17 per cent, rebounding from a weak quarter a year earlier. The electric-car maker had previously given guidance of $20bn in capex in 2026.
Musk told investors that there would be a “very significant increase in capital expenditure” this year, which “will be well justified considering substantially increased revenue streams”.
The new forecast is nearly triple the $8.5bn Tesla invested last year.
The world’s richest man cited the huge investment plans of his Big Tech rivals, which are plotting to spend $660bn this year mainly on chips and data centres as they vie to build the most advanced AI products.
Tesla shares initially rose in after-hours trading following its earnings report but reversed course after the new spending projections — trading down 1 per cent.
Musk has pivoted Tesla away from vehicles as its sales have fallen — retiring its X SUV and S luxury sedan models — to focus on AI-powered robotics, self-driving “Cybercabs” and an electric “Semi” truck.
Tesla and SpaceX also announced a joint venture last month to build a huge “Terafab” in Austin costing tens of billions of dollars to produce chips for Musk’s autonomous vehicles, robots and orbital AI data centres.
“Tesla is working on a lot of large, ambitious products,” Musk said. “They’re all very challenging, but I think they’re going to be revolutionary.”
However, Tesla has thus far only managed a limited robotaxi experiment in a few cities in Texas and Musk said the business would not contribute meaningful revenue until at least next year.
The company has yet to launch its Optimus humanoid robot and Musk again delayed the start of production to July or August.
“It is just literally impossible to predict . . . except that I think it will be quite slow at first,” Musk said when pushed on a commercial production timeline by analysts. “Optimus will be useful outside of Tesla sometime next year.”
Tesla’s financial performance has rebounded from a low point at the beginning of last year when its sales were hammered by a customer backlash to Musk’s political activities in the early months of Donald Trump’s second administration — and the company had to shut down a number of factories to prepare for new models.
It reported first-quarter net income increased to $477mn from $409mn in 2025, still the second-worst quarterly profit figure in five years. Revenue increased 16 per cent to $22.4bn, ahead of the average analyst estimate of $22bn compiled by FactSet, as vehicle deliveries ticked up.
After stripping out losses on its cryptocurrency holdings and an 87 per cent rise in stock-based compensation to $803mn, adjusted profits rose 56 per cent to $1.5bn.
The company has issued a special pool of shares to retain existing staff and recruit others during a fierce war for AI talent in Silicon Valley.
Capex jumped 67 per cent to $2.5bn during the quarter, less than expected, but Musk’s forecast pointed to a rapid increase in spending for the rest of the year.
“Capex had a sobering effect as the price of growth just went up,” said Dec Mullarkey, managing director of asset manager SLC Management. “There are a lot of prongs to its plans. As investing ramps up this year it will soak up a lot of free cash and shock investors.”
Tesla’s strategic direction and vast capital demands have led to speculation that Musk may ultimately seek to merge Tesla with SpaceX.
SpaceX has already taken over his AI start-up xAI and social media platform X and is plotting a June public listing at a valuation of $1.75tn. Tesla invested $2bn in xAI before the merger and its equity was converted into SpaceX stock.
“Ambitious capex plans are set to create loss centres for a while,” Jefferies analyst Philippe Houchois said. This “may fuel concern about funding and raise the logic of an eventual merger with SpaceX”.