The once-thriving electric vehicle leader is investing in a new future.
Death, taxes, and technology companies spending huge amounts on capital expenditures (capex). In 2026, these are certainties.
Alphabet just announced plans to invest $175 billion to $185 billion this year. This is another sign of the booming artificial intelligence (AI) craze taking over the economy.
Tesla (TSLA +1.59%), which doesn’t have the financial firepower that its “Magnificent Seven” peers do, is on the path of a massive spending spree related to AI, robotaxis, and robotics. Investors need to watch closely.
Image source: Tesla.
Driving in the fast lane
Tesla’s capex totaled $8.5 billion in 2025. That figure is set to exceed $20 billion this year. It would not be surprising at all to see another significant jump in 2027.
The business is investing in key projects that are essential to its long-term success. This includes six factories.
“On top of it, we will also be spending money for building our AI compute infrastructure and will continue investing in our existing factories to build more capacity,” CFO Vaibhav Taneja said on the Q4 2025 earnings call. “And then, you know, also the related infrastructure along with it.”
Expanding robotaxi and Optimus fleets is also a focus. And given that Tesla also wants to ensure there are no supply constraints, it aims to build a TeraFab to manufacture chips internally. This isn’t part of 2026’s spending plans.
“I think we’re getting into this investment phase because we have big aspirations,” Taneja mentioned.
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Funding the future
It’s widely publicized just how much Tesla’s core business is struggling, with auto sales dropping 11% in Q4 2025 (ended Dec. 31). This led overall operating income to fall 11%.
As the company looks to fund its future, investors must think about where the money will come from. Tesla is in a good position. It generated positive free cash flow of $6.2 billion in 2025. And it currently has $44 billion in cash, cash equivalents, and investments on the balance sheet. Assuming the business doesn’t start posting net losses, it has some runway to work with.
Management has other resources as well to bolster its liquidity position. It has started to talk to banks about funding needs, so there could be debt that’s taken on.
It helps that Tesla has a monster $1.2 trillion market cap and a stock that’s trading at a price-to-earnings ratio of 365. The high valuation gives it the option to raise equity capital with minimal dilution if needed.