Tesla cuts capex plan to $20 billion, raising doubts over AI ambitions

Tesla cut its annual capital expenditure plan to around $20 billion from over $25 billion, raising concerns about delays in Elon Musk's AI, robotaxi and humanoid robotics ambitions.

Tesla Inc pulled back its spending plans after investment last quarter trailed expectations, clouding Elon Musk’s effort to transform the electric vehicle maker into an AI and robotics company.

 

Capital expenditures will be around $20 billion this year, the company said late Wednesday after reporting earnings results. That marked a reversal from earlier this year, when Tesla raised the target to more than $25 billion.

 

Tesla had been consistently short of the pace needed to hit its spending goal, particularly after a $4.73 billion outlay in the third quarter. Analysts had expected $7.95 billion on average in estimates compiled by Bloomberg.

 

Heavy spending is needed to help Tesla reorient its operations around futuristic business lines such as artificial intelligence, Optimus humanoid robots and autonomous driving. The shift is seen as a central justification for a potential merger with SpaceX — a historic transaction that Musk this week said the firms are exploring.

 

 

“For almost any company, spending less and generating cash is good news. Tesla is the exception because the stock is not priced as a car company,” said Dave Mazza, chief executive officer of Roundhill Investments.

 

“Capex is the only hard number investors have for how fast Optimus and Cybercab are actually being built, and cutting the guide by $5 billion six months after raising it by $5 billion looks less like discipline and more like the ramp slipping for the future.”

 

The capex figure was a notable surprise in a quarter that also saw Tesla beat analysts’ profit estimates and tout rising customer demand for its automated-driving software. Adjusted earnings were 48 cents a share in the period, while Wall Street had anticipated 44 cents on average. Revenue of $28.05 billion was slightly below expectations.

 

The company’s initiatives are currently supported by a narrow product lineup that consists of only three consumer vehicles: the Y and 3 models, along with the polarizing Cybertruck. Competition for EVs is also heating up.

 

Tesla ended the quarter with the largest passenger vehicle backlog in four years, citing battery availability as a limiting factor.

 

On the call with analysts on Wednesday, Chief Financial Officer Vaibhav Taneja said capital expenditures will continue to grow as Tesla invests in its robotaxi fleet and expands production for the humanoid robot and solar products. It’s also spending on improving computing infrastructure and building a semiconductor plant.

 

Musk tempered expectations around the timeline for Optimus, citing supply-chain challenges, the need for more training data and continued difficulties with the hand design. It will likely take until the end of 2027 for Tesla to work through the various issues, he said.

 

“Lower capex is only positive if it doesn’t come at the expense of future growth,” said Haris Khurshid, chief investment officer at Karobaar Capital.

 

“Given how much their future valuation depends on robotaxi and Optimus, I want to know whether the spending is simply shifting between quarters or whether the ramp is taking longer than expected.”