Tesla Must Be in Trouble

RJ Hamster

By Jeff Brown, Editor,
The Bleeding Edge

Tesla is in trouble…

“Tesla Earnings Fall 17%… Model S, X to End.”

“End of an Era: Tesla Discontinues Model S and Model X”

“Tesla closes a year with a decline in sales for the first time – Musk abandons models.”

“Tesla Just Killed Half Its Model Lineup.”

“DEAD: Tesla Is Killing Off the Model S and Model X”

Oh my…

These read like an obituary.

It must be bad. It must be far worse than we thought.

Tesla is forced to shut down two of its most iconic product lines, the Model S sedan and Model X SUV.

And these aren’t rumors…

They were announced on Tesla’s earnings call last night for its fourth quarter and full year 2025 results.

And it actually appears worse than many have realized…

Tesla’s annual sales in 2025 are not only lower than 2024… they are also about $2 billion lower than 2023 sales.
Tesla’s net income hasn’t been this low since 2021 – it’s actually lower than 2021’s net income.
Tesla’s earnings per share declined 42% year on year.
And Tesla’s forecasted free cash flow for 2026 is less than one-third of 2025 numbers.

Worse yet, the industry’s electric vehicle share as a percentage of total vehicles sold in Q3 of 2025 appears to have peaked at 10.5%… and had plummeted to just 5.8% in Q4. A bad omen for EVs?

What in the heck is going on?

Is this a company in decline? Are electric vehicles on the decline?

The Model S and Model X are profitable product lines. They are also incredible cars.

Why in the world would Tesla shut them down? And it’s happening so quickly!

Musk said that the production lines are being shuttered in the second quarter of this year, months from now. So fast!

Feels like a rash decision! Musk is chasing his tail! Grasping at straws!

Or at least…

That’s what the doubters and decels will have us believe.

Optimizing for AI

Not. Even. Close.

The reality is that while the Model S and Model X product lines were profitable, they were relatively low volume.

Source: Tesla

Production capacity was around 100,000 units annually. And because they are electric vehicles (car-sized), the production lines take up a lot of space.

So, Tesla is going to shut those lines down and convert them to production lines to manufacture Tesla’s general-purpose, intelligent humanoid robot – Optimus.

Mass production will begin before the end of this year… and capacity will become 1 million robots a year.

In other words: Tesla is making space for the future. And the future… is general-purpose intelligent robots.

As I have maintained, for almost a decade now, Tesla is not a car company…

It is an artificial intelligence company.

Its breakthrough artificial intelligence technology is simply embodied in electronics products – like electric “vehicles” (I’ve called them robots-on-wheels) or humanoid robots.

Here’s the right framework to think about Tesla’s electronics products…

They confer an economically valuable and desirable benefit to Tesla’s customers.

And they are real-world data collection devices, used to accelerate the training of Tesla’s artificial intelligence.

Exponential Data

Take a look at the chart below.

It shows exactly how dramatically Tesla’s data collection has grown since 2022, using its full self-driving (FSD) software and AI hardware employed in every Tesla.

Tesla has now collected data on nearly 7.5 billion miles driven on FSD… and this is on top of more than 9 billion miles collected on its previous software Autopilot.

Source: Tesla

And we should remember, Tesla’s FSD software was foundational to Optimus’ software used to navigate the real world.

Instead of navigating on four wheels, Optimus navigates on two feet.

Tesla announced yesterday that its “fleet” of vehicles around the world collects the equivalent of 500 years of continuous driving every single day.

This is precisely why Tesla’s FSD is now able to handle all the outlier situations that come up once in a blue moon – because it has seen just about everything possible.

For perspective, Tesla now collects more training data every two days than Waymo has cumulatively collected over the last decade.Every two days!

Everything that Tesla is doing right now is about AI.

Its advancements with its FSD software have enabled the unsupervised robotaxi service, which is already deployed in Austin.

Almost 700,000 miles of robotaxi rides have been given between Austin and San Francisco.

Source: Tesla

Soon, Tesla will be able to remove safety drivers in the San Francisco area, and it will expand to Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas.

And here’s what I want my readers to understand…

All of these cities are chosen intentionally, as they are in states that have been supportive of autonomous driving technology. More “robots-on-wheels” on the road… more data collected.

And if you can’t immediately grok the significance of that…

Perhaps the most interesting announcements recently were around Tesla’s AI hardware.

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50X

Tesla is currently building out its Cortex 2 AI supercomputer at its Gigafactory Texas facility.

It’s doing so to more than double its AI training computational resources.

This will be completed in the first half of this year.

Source: Tesla

And perhaps even more telling is that its next-generation of AI hardware – known as AI5 – will be delivering a 10–12X increase in raw computational power, and ~50X improvement in performance over the current AI4 hardware.

50X improvement. Not 50%.

Source: Tesla

Cybercab mass production begins in the first half of this year, which – as a reminder – has no steering wheel or gas/brake pedals.

These are fully autonomous, level 5, self-driving cars designed for mass public transportation.

Cybercab Cold Weather Testing in Alaska | Source: Tesla

But the kicker, I mean the real kicker, is all about general-purpose intelligent humanoid robots.

The Force Multiplier

Tesla will ramp production up to 1 million humanoid units a year… as quickly as it can.

The reason is simple: This is a billion-unit-plus market opportunity – worth more than $25 trillion.

When we understand this, the decision to shut down the lesser-productive EV lines is a no-brainer. Painful decision, yes, but also the right one for Tesla’s future.

Musk is optimizing for the future.

And yet, the experts are already screaming that Tesla and Elon Musk won’t be able to do it.

“Despite Elon Musk’s remarks, robots won’t be ‘major’ to consumers,” wrote Yahoo Finance.

Many are already claiming that Musk is nowhere near being able to accomplish what he says he can do.

From CBNC…

Musk has been trying to turn attention away from traditional EVs and toward a future of driverless cars and humanoid robots, areas where the company currently has virtually no business.

What a risky move.

Even one of the godfathers of AI, Yann LeCun, an “expert,” very pointedly says that none of the humanoid companies “have any idea how to make those robots smart enough to be useful.” This was a very intentional, targeted criticism directed at Musk.

And of course, he says that he knows the way…

My prediction is that LeCun is going to have to eat crow.

And a lot of it.

He is patently wrong. He is deeply biased. And his intellect is shrouded and obscured by political cognitive dissonance.

He will be embarrassed and left behind. History will not treat him well. He’ll be “right” only in the echo chamber of his own mind.

As I have shared for years, the killer app is autonomy.

And autonomy is entirely enabled by AI.

Elon Musk understands this. This is why Tesla trades at multiples of an AI company, not a car company.

And it’s also why Optimus is going to be the most incredible electronics product the world has ever seen. A force multiplier for economic growth. A transformation of the world’s labor market.

An unstoppable force that will bring us a future that has only been dreamed of.

Jeff