Tesla has experienced its first-ever decline in annual revenue, with Elon Musk committing significant investments into artificial intelligence and robotics. The company reported a 3% drop in total revenue for 2025, accompanied by a staggering 61% decrease in profits. Musk, who now also owns X, announced that Tesla will discontinue production of its renowned Model S and Model X vehicles. Instead, the focus will pivot towards AI and autonomous driving technologies, a move encouraged by numerous investors. In a bold strategy for the future, Tesla plans to allocate $20 billion next year, a decision Musk describes as “making big investments for an epic future.”

The facility in California, previously dedicated to manufacturing the S and X models, will now transition to producing Optimus humanoid robots, with the goal of reaching an annual production of one million. Tesla disclosed plans to allocate $2 billion towards Musk’s xAI, while the bulk of the funds will support projects like the Cybercab—a fully self-driving vehicle devoid of pedals and a steering wheel—alongside the Tesla semi-truck, Optimus robots, and battery and lithium production facilities. Musk emphasized that this year will witness substantial capital expenditures as the company gears up for an ambitious future. This significant shift in focus comes amidst a notable reduction in Tesla’s financial performance, following Musk’s brief and contentious involvement in politics and his short stint in Donald Trump’s DOGE department.

These actions have incited protests across the US and UK, leading to Tesla vehicles becoming targets of public discontent against Musk. His departure from the Trump administration in May of last year coincided with a sharp decline in Tesla’s car sales. Recently, Musk has been entangled in a dispute with the UK government concerning X’s Grok AI, which was implicated in generating inappropriate images. Prime Minister Sir Keir Starmer recently pledged to maintain pressure on Musk, who retaliated by characterizing Britain as “fascist.” In response, X has announced that Grok will no longer have the capability to modify photos to depict real individuals in compromising attire in jurisdictions where such actions are illegal.

A statement read: ‘We have implemented technological measures to prevent the Grok account from allowing the editing of images of real people in revealing clothing such as bikinis. This restriction applies to all users, including paid subscribers.’ Tesla joins Facebook-parent Meta, Microsoft and Alphabet in planning sharp increases in capital spending this year, as those companies invest heavily in hardware and data centres to support AImodel training and customer demand. Andrew Rocco, stock strategist at Zacks Investment Research, said he viewed the $20 billion as ‘necessary spending.’ ‘If Optimus is going to be a best-selling product, the AI must be trained as well as possible,’ he said, adding the planned spending gives him ⁠confidence that Musk’s ‘sometimes loose timelines will actually be honoured’.

Tesla’s Chief Financial Officer Vaibhav Taneja said the company has more than $44 billion in cash and investments on the books that it can use to fund the investments. He signalled this year was not likely to be the end of increased spending, adding the company could look ‍to pay for the investments ‘through more debt or ⁠other means’. Musk said Tesla was embarking on some of the spending projects not for fun, but rather ‘out of desperation’. ‘Can other people, please, for the love of God, in the name of all that is holy, can others please build this stuff?’ Musk said, referring to spending on cathode and lithium refining. ‘It’s very hard to build these ⁠things.’