Is this Elon Musk’s master plan? xAI to power Tesla’s Optimus robot

First, he positioned xAI as a major challenger to OpenAI, then let his AI startup swallow the social media platform X (formerly Twitter), and at the same time intensified his other company’s efforts in autonomous driving and robotics. And now Elon Musk is giving hints about what he’s really after in developing AI models that currently run at xAI under the Grok brand.

Elon Musk’s AI startup xAI is burning through money at a rapid pace: In the third quarter of 2025, the company posted a net loss of 1.46 billion dollars, according to internal financial documents that Bloomberg has obtained. In the first nine months of the year, xAI spent a total of 7.8 billion dollars in cash – for data centers, talent acquisition, and the development of software that will power humanoid robots like Tesla’s Optimus in the future. The loss has increased significantly: in the first quarter it was still 1 billion dollars. Like other rapidly growing AI startups, xAI is quickly deploying funds from recent funding rounds to achieve its ambitious goals.

Tesla’s Optimus needs a brain

Despite the high losses, xAI is also showing growth: revenue nearly doubled in the third quarter, reaching 107 million dollars for the three months through the end of September 2025. Gross profit rose from 14 million dollars in the previous quarter to 63 million dollars. In an investor call, xAI leadership, including Chief Revenue Officer Jon Shulkin, explained that the focus is now on rapidly developing AI agents and software. These products are intended to flow into what is called “Macrohard” – a term Musk uses for a pure AI software company, a play on “Microsoft”. Long-term, the technology is meant to power Tesla’s Optimus robot, which is supposed to replace human labor.

Because in the development of Grok models, it’s becoming increasingly clear that multimodal capabilities are what matters – capabilities that LLMs should master. This means that in later versions, Grok won’t just be deployed as a chatbot on the web to generate images, for example, but also as a “brain” for robots like those from Tesla.

Interconnection in the Musk universe and massive fundraising activities

Musk tightly links his various companies together: Grok, xAI’s chatbot, is fully integrated into X (formerly Twitter) and is also available in Tesla vehicles. SpaceX has already invested in xAI, which in turn has spent hundreds of millions of dollars on Tesla Megapack batteries. Tesla itself is currently not an xAI investor, although Musk favors a formal connection. A non-binding vote by Tesla shareholders in November on an investment in xAI did not receive enough votes. Tesla’s board is examining next steps, according to General Counsel Brandon Ehrhart.

To cover the enormous expenses, xAI Holdings – the parent company of xAI and X – recently completed an equity round of 20 billion dollars. Investors include Nvidia, Valor Equity Partners, and the Qatar Investment Authority. The company’s valuation is now 230 billion dollars. With this capital, xAI can likely continue for about a year, since monthly investment spending is under 1 billion dollars. In total, xAI has raised at least 40 billion dollars in equity so far. Additionally, the company is working with Valor and Apollo Global Management on a special purpose vehicle to purchase Nvidia chips.

Losses rise, annual targets in question

EBITDA losses – earnings before interest, taxes, and depreciation – were minus 2.4 billion dollars through September, already exceeding the originally projected 2.2 billion dollars for the full year before year-end. On revenue, too, xAI could miss its annual target: in June, the company had aimed for 500 million dollars in revenue for 2025, but by September had achieved only just over 200 million dollars. Nevertheless, executives were optimistic in the investor call and emphasized revenue growth. Year-end figures, which according to management came out positive, have not yet been shared with investors.

XAI has also invested heavily in personnel: by September, the company paid out nearly 160 million dollars in stock-based compensation – a sign of intense competition for AI talent. There were changes at the leadership level: Anthony Armstrong, formerly at Morgan Stanley, joined as CFO in the fall, while Jon Shulkin from Valor Equity also took on a new role. The previous CFO Mike Liberatore had left the company after just three months last fall. In parallel, xAI is expanding its infrastructure: the Colossus data center in Memphis is being expanded, and recently xAI purchased a third building in the region, which is expected to bring computing capacity to nearly 2 gigawatts.

Musk wanted to integrate OpenAI into Tesla

This picture is rounded out by the following story: It is known that Musk, as a co-founder of OpenAI, wanted to “attach” the then tiny AI startup to Tesla as a cash cow in February 2018. “Tesla is the only way to even come close to matching Google. Even then, the probability of being a counterweight to Google is low,” he argued in an email at the time. The rest is history: Musk left OpenAI, witnessed its rise with the help of Microsoft and its transformation from non-profit to for-profit company – and now finds himself ultimately in a legal dispute with OpenAI CEO Sam Altman, which will bring the two before court in March 2026.

In any case: long before the ChatGPT breakthrough, it was Musk’s plan to combine his car company with an AI company. Now it’s supposed to succeed in a different way – namely through the combination of xAI and Tesla. Robots that can be used both in factories and in private life are considered a massive future market. Analysts from Goldman Sachs and Morgan Stanley predict, for example, that the robot market could reach a size of five trillion dollars by 2025. For comparison: the global auto market is currently about 3 to 4 trillion US dollars per year. Long-term, the robot market could reach or even double the current size of the entire global auto industry when you include services and software.