Tesla capex Q2 jump hits cash flow as Musk funds chips and robots

Tesla capex Q2 spending more than doubled to $5.8 billion as the company put more money into AI silicon, robotics and related infrastructure. The outlay drove negative free cash flow of $1.1 billion, and Tesla said full-year capital spending is expected to top $25 billion.

The company described the period as its “largest and most exciting period of investment,” a broad framing for several expensive bets tied to Elon Musk’s AI plans. Tesla did not provide a detailed breakdown of the $5.8 billion spend by program, timeline or expected return.

Why is Tesla spending so much on chips and robots?

Musk told analysts that Tesla is placing a “high-risk, high-payoff bet on AI chips” because it believes it will need more compute capacity than outside suppliers can reliably provide. He linked that need directly to Optimus, Tesla’s humanoid robot, which he again said could become the company’s biggest product while also acknowledging that it is “a very complex problem to solve.”

The centerpiece of that chip push is Terafab, a proposed Austin development fab. Musk said equipment orders have been placed and described a facility intended to include lithography mask production, logic, memory, packaging and chip testing in one location, with the goal of shortening the cycle between design changes and production feedback.

That description leaves open several questions operators and investors will care about: how much of the $25 billion-plus annual capex plan is tied to Terafab, when the facility would be operational, and whether Tesla intends it for development work, scaled production, or both. Musk gave no detailed cost, capacity or schedule on the call.

Tesla’s core auto business showed volume growth but weaker profitability. Vehicle deliveries rose 25% year over year in Q2 to 480,126, and automotive revenue exceeded $20 billion. Operating margin, however, dropped to 1.4% from 4.1% a year earlier, limiting the company’s ability to fund speculative programs from higher-margin vehicle sales.

Optimus is not the only capital-intensive plan competing for attention. Musk also discussed Robotaxi, saying Tesla is scaling the project as quickly as it can while under close regulatory scrutiny and while trying to avoid harming people or pets. He did not disclose a new rollout schedule in the remarks summarized by the company.

Competition is also building outside Tesla. Chinese companies are promoting their own humanoid robots, while Musk claimed Optimus would be the first capable of generalized tasks. Tesla’s claim remains a product and execution test, since the company has not disclosed broad commercial deployment metrics for Optimus.

Musk was also asked about combining Tesla with SpaceX, another company he leads. He said there is overlap but that a combination could not be discussed on Tesla’s results call. Tesla general counsel Brandon Ehrhart said the company continues to benefit from its relationship with SpaceX and has “numerous beneficial transactions” with it.

Investors reacted poorly after the results, with Tesla shares falling in after-hours trading. The reaction reflects a familiar tension for the company: deliveries are still growing, but the margin profile is weaker while Musk is asking shareholders to underwrite a much larger AI hardware and robotics buildout.

This story draws on original reporting from The Register.