Tesla announced it is tightening the links between its automotive, energy, and artificial intelligence ambitions in a way few public companies have attempted: by investing directly into xAI while simultaneously reshaping its manufacturing roadmap around robotics. These moves, disclosed in SEC filings and earnings-call coverage, position Tesla less as a premium EV maker and more as a vertically integrated “physical AI” platform, spanning data centers, grid-scale batteries, humanoid robots, and autonomy.
Earlier this month, Tesla disclosed that it entered into an agreement on January 16, 2026, to invest approximately $2 billion in xAI’s Series E Preferred Stock, citing a review consistent with the board’s fiduciary duties and its related-party transactions policy.
The investment is notable not just for its size, but for what it signals: Tesla is treating xAI as strategically adjacent to its next growth pillars—autonomous driving and robotics—rather than as a separate Musk venture operating in parallel. Reuters also reported Tesla’s $2 billion commitment as part of a broader market narrative about Elon Musk’s companies becoming more interconnected as Tesla pushes deeper into AI and robotics.
Model S and Model X Being Retired
At the same time, Tesla is moving to discontinue its long-running Model S and Model X flagship sedans and SUVs. Multiple reports linked the decision to a strategic pivot: Tesla plans to reallocate attention and factory space toward robotics, including its humanoid-robot program, rather than continuing low-volume, higher-priced vehicle lines.
Business Insider highlighted the underlying sales pressure: Tesla’s “other models” category—which includes Model S, Model X, and Cybertruck—totaled 50,850 units in 2025, a small single-digit share of Tesla’s total volume, underscoring why the company might view these vehicles as less central to its future than scalable AI-driven products.
xAI bought $430 million of Tesla’s Megapack systems
Tesla’s annual report also revealed an equally consequential operational linkage already in motion.
In its Annual Report on Form 10-K for the year ended December 31, 2025, Tesla reported that it recognized $430 million of revenues (and $285 million of cost of revenues) from xAI during 2025 for xAI’s purchase of Tesla’s Megapack products “in the ordinary course of business.”
That disclosure matters because it shows the relationship is not just financial: it is infrastructural. Megapack is designed for grid-scale storage, and in the AI era, the market is increasingly focused on power stability and buffering for energy-intensive compute. Tesla’s filing positions Megapack as a product aligned with “AI infrastructure” load growth, reinforcing why an AI company would be a meaningful customer.
Put together, the moves outline a single strategic arc:
- Capital flows from Tesla to xAI via a ~$2 billion preferred equity investment, formalizing Tesla’s stake in the AI stack that could underpin autonomy and robotics ambitions.
- Industrial capacity shifts away from legacy flagships (Model S and Model X) toward robots and autonomy-centric manufacturing priorities, reflecting management’s view of where the next S-curve lies.
- Energy infrastructure flows from Tesla to xAI through hundreds of millions of dollars in Megapack sales, supporting power-hungry AI operations.
In other words: Tesla is not merely “pivoting.” It is attempting to build an integrated flywheel in which AI research and deployment (xAI) drives demand for energy storage (Megapack), while Tesla’s robotics and autonomy ambitions benefit from tighter alignment with Musk’s AI ecosystem.
The governance question investors will keep asking
These moves also concentrate a familiar corporate-governance tension: Tesla is a public company, while xAI is closely associated with Tesla’s CEO and his broader portfolio of companies. Tesla’s 10-K describes transactions with entities affiliated with its CEO and directors—including xAI—under its related-person transaction policy, emphasizing that these relationships are being managed through internal review processes.
But the scale—$430 million of product revenue in a single year plus a $2 billion equity investment—virtually guarantees that investors, analysts, and regulators will scrutinize pricing, prioritization, and resource allocation, especially as Tesla reduces emphasis on certain vehicle lines to make room for new bets.
