Elon Musk warns of rising Tesla costs as AI, robot investments ramp up

Tesla is preparing for a significant rise in spending as it ramps up investments in artificial intelligence (AI) and robotics, according to chief executive Elon Musk.

Speaking on a conference call after the company reported first-quarter results, Musk said capital expenditures would increase “substantially in the future” as Tesla enters a major investment phase. 

He described the planned spending as necessary to support what he expects will be a much larger revenue stream driven by emerging technologies.

Chief Financial Officer Vaibhav Taneja said the company now expects capital expenditures to reach about $25 billion this year, up sharply from earlier projections. Tesla had previously indicated spending of more than $20 billion in 2026.

The automaker is betting heavily on AI-powered self-driving vehicles, including robotaxis, as well as humanoid robots—initiatives that represent one of the most expensive strategic shifts in the company’s history. 

Taneja added that Tesla is likely to post negative free cash flow for the remainder of 2026 as those investments accelerate.

Despite the warning on future spending, Tesla reported a stronger-than-expected first quarter, with positive free cash flow of $1.44 billion, defying forecasts of a cash burn. 

However, the company’s shares pared earlier gains following executives’ comments about rising costs.

Revenue for the quarter came in at $22.39 billion, slightly below analysts’ expectations, while vehicle deliveries missed forecasts but still rose compared to a year earlier. 

Tesla said demand improved across several regions, including Asia-Pacific and South America, with signs of recovery in Europe and North America.

The company’s core automotive business continues to face pressure from intensifying competition and pricing challenges, as well as the expiration of certain electric-vehicle incentives in the United States. 

Tesla is working on a smaller, more affordable SUV aimed at expanding its customer base, though the project remains in early development.

Meanwhile, Tesla’s energy generation and storage division has emerged as a strong performer, supported by growing demand for large-scale battery systems used in renewable energy and grid stability.

Analysts say the company’s aggressive investment push underscores its long-term focus on AI-driven growth, even as it navigates near-term financial pressures and a rapidly evolving global market.