Musk’s $20 billion spending plan suggests ‘yesterday’s Tesla is over’

in Tesla’s At its Fremont, Calif., factory, the company is preparing to spend $20 billion this year in what it considers a transformational move, with plans to build robots to replace older cars.

“Forget the Tesla you knew,” Canaccord Genuity analysts wrote in a note after Tesla’s fourth-quarter earnings report. “Yesterday’s Tesla is over. We believe Elon Musk has reached a decisive ‘burn the ship’ inflection point, a complete commitment to his vision that leaves no room for retreat.” Analysts recommend buying the stock.

Capital spending fell 24% last year to $8.6 billion, but Tesla on Wednesday suggested that number would more than double in 2026 as the company shifts its business away from electric vehicles and toward artificial intelligence, with a focus on driverless technology, humanoid robots and, ultimately, chips to support its long-promised ambitions.

Tesla stock fell 3.5% to close at $417.89, taking its decline in January to more than 7%.

Automotive revenue, which still accounts for about 70% of Tesla’s business, fell 10% in 2025 as Tesla failed to offer new EV models and faced increased competition around the world, particularly from China’s BYD and Europe’s Volkswagen and BMW. Tesla’s total revenue fell last year for the first time on record.

At a financial results conference after the news, Musk said that the company would end production of the Model S sedan and Model X SUV. Together, they accounted for less than 3% of the company’s shipments last year, but they helped bring Tesla’s EVs to the mainstream.

Musk said the lines that were producing these models in Fremont will be converted into a factory that will make the Optimus robot, which is not yet on the market. The company promotes Optimus as a bipedal, intelligent robot that could one day do everything from factory work to surgery to babysitting. He acknowledged that Optimus has not yet been used “substantially” in Tesla’s factories.

Musk said Optimus could eventually make Tesla a $25 trillion company (its current market cap is $1.4 trillion) and said last year that 80% of Tesla’s value would eventually come from robots.

Tesla declined to say during its earnings conference this week how much of this year’s $20 billion in capital spending will go toward Optimus. CFO Vaibhav Taneja said the funding will go towards work at six factories, including a refinery that makes battery storage, as well as the development of driverless CyberCabs, semi-electric trucks and the Optimus factory.

“In addition to that, we will also spend money on building AI computing infrastructure and continue to invest in our existing factories to build more capacity and associated infrastructure along with it,” Taneja said.

Musk said the company plans to ramp up an Optimus production line capable of producing 1 million units a year, but acknowledged, “We’re still in the early stages of Optimus,” calling it a research and development project.

Musk, who is famous for not meeting self-imposed deadlines, said: “We don’t expect to see significant production volumes of Optimus until probably the end of this year.”

In addition to its pursuit of Optimus, Tesla plans to expand its robotaxi ride-hailing fleet in the U.S. and continues to strive to deliver on its decade-old promise to provide self-driving systems that safely operate cars without the need for a human driver to steer or brake at any time.

Tesla launched a Robotaxi-branded ride-hailing app in 2025 and is operating a pilot service in Austin, Texas. Tesla executives announced last week that the company had placed human safety observers in several of its vehicles in Austin and conducted driverless passenger rides. Last year, the company launched a driver-driven service in the San Francisco area.

The company said in an investor document Wednesday that it plans to cover seven additional U.S. markets in the first half of this year. Those cities are Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas.

In addition to all the technical challenges and financial burdens associated with robots and driverless cars, Tesla faces fierce competition in both areas. of the alphabet Waymo is rapidly expanding its robotaxi service in the United States. Baidu’s Apollo Go is growing in China. And in robots, Apptronik and Boston Dynamics are among the players in the US, with companies like Unitree and Agibot participating in China.

Another area where Musk expects the company to invest heavily is chips. He said major suppliers like Samsung Taiwan Semiconductor Manufacturing Co., Ltd. and micron There’s no chance they’ll be able to produce enough hardware to meet Tesla’s needs.

“To remove this constraint, we will probably have to build a Tesla Terrafab domestically, a very large fab that includes logic, memory and packaging, probably within three to four years,” Musk said. “And that actually becomes very important as well to ensure that we are protected from geopolitical risks.”

He added: “We’re going to be paranoid and make sure that no matter what happens, we can continue to make batteries, robots and AI chips.”

This year’s spending goals do not include the TeraFab plan, Taneja said. Also not explained is Musk’s vision for starting solar cell manufacturing in the United States.

Barclays analysts who recommend owning Tesla stock said in a note Thursday that while cars may still be the company’s core business, the demise of the Model S and X marks a “symbolic baton pass” to “physical AI.”

“If it wasn’t clear before, it is now more than clear that Tesla is not a car company,” the analysts wrote.

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