Elon Musk's Tesla to invest $2B in xAI as EV maker's revenue, profit slump

Core Viewpoint - Tesla has agreed to invest approximately $2 billion in Elon Musk's AI startup xAI, enhancing the relationship between the two companies as Tesla positions itself as a leader in autonomy and robotics [1][3]. Financial Performance - Tesla reported revenue of $24.9 billion for the quarter ending December 31, a decrease of 3% year-over-year, but surpassing analysts' expectations of $24.79 billion [3]. - Profit fell significantly by 61% to $840 million during the same period [3]. Market Expectations - Wall Street anticipates Tesla will deliver 1.77 million units in 2026, reflecting an 8.2% increase according to Visible Alpha data [4]. - The vehicle business is facing challenges as competitors introduce newer models at lower prices, and the expiration of a US tax incentive for electric vehicles has impacted sales [4]. Strategic Focus - Investors are increasingly interested in Musk's initiatives in self-driving technology and robotics, seeking evidence that the transition from promise to product is occurring [5][7]. - Tesla is utilizing lower-priced "Standard" versions of its Model 3 and Model Y to attract price-sensitive consumers, a strategy expected to drive growth in 2026 deliveries despite potential margin pressures [5][6].